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Investment Association clarifies approach for 2019 AGM season


IA approach on post-employment shareholdings and pension policy


In November 2018, the Investment Association (IA) published an updated version of its Principles of Remuneration.  The revised Principles reflect many of the recent changes to the UK Corporate Governance Code (published in Summer 2018), including setting out expectations around post‑employment shareholding guidelines, reducing the gap between pension contribution rates for Executive Directors and the wider workforce, and the response to significant shareholder dissent. In response to a subsequent request by some of its members, the IA has now issued a statement clarifying the approach that its corporate governance research arm, IVIS, will adopt for the 2019 AGM season in relation to post-employment shareholding requirements and Executive Director pension contribution levels.  This approach will apply to all Remuneration Policy and Remuneration Report resolutions for years ending on or after 31 December 2018.


Approach on post-employment shareholding requirements


  • If the Remuneration Policy is subject to a vote in 2019, it should include a post‑employment shareholding requirement in line with the Principles (i.e. the lower of actual shareholding on cessation and the in-post shareholding guideline, for two years).  Non-compliance will be flagged by issuing an Amber Top on the Remuneration Policy.

  • If the Policy is not subject to a vote in 2019, companies that are not in line with the Principles will be noted.

Approach on Executive Director pension contribution levels For new ED appointments (whether new joiners or promotions to the Board)


  • Remuneration Policies subject to a vote in 2019 should make it explicit that any new appointees will have their pension contributions set in line with the pension contributions provided to the majority of the workforce. IVIS will otherwise Red Top the Policy.

  • The Remuneration Report will be given a Red Top if new appointees from 1 March 2019 have pension contributions at a higher level than the pension contributions provided to the majority of the workforce.

For current Executive Directors


  • Where current Executive Directors receive a pension contribution of 25% of salary or more, the Remuneration Report (and, where a vote is offered, the Remuneration Policy) will be given an Amber Top.

The IA is also requesting companies to disclose the pension contribution level considered to be the level for the majority of the workforce, and confirm in the Remuneration Report if the pension contributions for new joiners, new appointees or existing Executive Directors are at the level for the majority of the workforce. Mercer | Kepler commentary and next steps The clarification by the IA of its approach to post-exit shareholding guidelines and pension contribution levels is welcome, particularly given the potential uncertainty going into the AGM season surrounding the likely investor reaction to recent shifts in the external remuneration landscape.  That said, the severity of the policy may give some companies cause for concern; in particular, those that are ‘going early’ with a binding vote on the Remuneration Policy in 2019 (and which have had comparatively little time to respond to the flurry of new guidelines published at the end of 2018), and/or where legacy contractual pension provisions for incumbent EDs exceed the IA’s stated threshold.

We encourage companies that are concerned about the acceptability of arrangements not fully aligned with the IA Principles, or the stated voting policy for 2019, to provide detailed rationale in the DRR for the approach taken in 2019 and to consider contacting the largest investors directly in advance of the AGM to solicit support.


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.

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