Shareholder advisory services such as the Institutional Shareholder Service (ISS) and Glass Lewis still wield a high degree of influence on pay votes, and have driven many of the large rebellions.
However, the IA’s new guidelines give fund managers more cover to approve larger deals if they believe they are in the best interest of shareholders. The IA’s three principles say that pay should be linked to performance, should benefit the long-term health of the business and sustain share price growth.
The trade body represents more than 200 fund groups, including BlackRock and Legal & General. It has stressed that the new guidelines are “principles, not rules” and that each pay deal should be made on a case-by-case basis.
“We have simplified our principles of remuneration to demonstrate that investors want to incentivise delivery of long-term performance,” said Andrew Ninian from the IA.
“Our principles set out the main areas that investors are interested in, stress that each company should adopt a structure that makes sense for its business and the market it operates in, and that we expect early engagement on any potentially novel changes.
“Investors want to see companies succeed and deliver long-term returns to their shareholders, with the structure of executive pay playing an important role in driving and rewarding these results.”
Pay revolts have lessened in recent years amid fears about London’s competitiveness. The number of pay deals receiving significant “no” votes fell by 50pc this year versus 2023, according to the IA.