• Mercer | Kepler

April 2018 market update


The 2018 AGM season is in its early stages and we are starting to observe new developments based on some early DRRs being published from December year-end companies. These include:

  1. In December 2017, the UK Financial Reporting Council released its proposals for a revised UK Corporate Governance Code which includes recommendations to implement the changes identified for the FRC in the Government response to the Green Paper Consultation.  Here is the Mercer response to the consultation for your information. To access the FRC’s full publication, please click here.

  2. Rio Tinto consulted with shareholders on the proposed introduction of Restricted Stock to replace performance shares granted under its LTIP. The proposal included significantly reducing the maximum quantum received to compensate for the absence of performance conditions. However, following investor feedback, the RemCo was uncertain whether the changes would receive enough votes to be deemed ‘acceptable’.  The RemCo therefore decided to withdraw the proposal and revert to a conventional LTIP structure.

  3. Unilever has disclosed it is now revising its Executive Director remuneration policy to be consistent with the comprehensive review of its Reward Framework for its “Top 500” executives below Board level in 2017. Under the new Reward Framework the only long-term incentive, the Management Co-Investment Plan (MCIP), requires executives to invest their annual bonus to participate. Furthermore, Unilever now operates a single cash-based ‘fixed pay’ approach, which combines salary, pension and benefits into one element, with the annual bonus opportunity now expressed as a % of fixed pay.  Furthermore, the share ownership requirement is also expressed as a multiple (5x for CEO) of fixed pay, and with a post-termination extension of 2 years.

  4. Metro Bank’s 2017 DRR includes great detail on its remuneration policies for the broader employee population as well as details of its Gender Pay Gap. This is in response to the proposed expansion (by the FRC) of a RemCo’s remit to take on responsibility for remuneration and workforce policies across the business as a whole.

  5. Old Mutual Global Investors has called for a major overhaul of corporate governance including reform of executive pay and company culture. In their latest submission to the Financial Reporting Council, the influential investor has called for conventional, and ‘controversial’, long-term incentive schemes to be replaced with restricted stock that vest over 5-7 years as they believe current company LTIPs are becoming too complex.

  6. We expect to see more companies publishing their CEO pay ratio this AGM season; early publishers include Coats (25x), Legal & General (86x) and Mitchell & Butlers (63x) who have chosen to compare CEO pay with the ‘median’ employee.

  7. We also expect to see greater prevalence of D&I measures in incentives in the Financial Services sector, as the push for equal pay and commitments (from many) to the Women in Finance Charter influences Committee decisions on executive pay. Early releases of 2017 DRRs show that both Barclays and Moneysupermarket have introduced (or maintained) D&I metrics in their annual bonuses.

Please do not hesitate to get in touch should you wish to discuss any of the above.


This briefing is for general guidance and does not necessarily cover all areas of the topics included in this briefing. It is not designed to give legal or other professional advice.

© Mercer | Kepler 2020 all rights reserved

  • Black LinkedIn Icon