Fair Reward Framework: Online tool launched to provide comparable data on FTSE 100 executive pay

A group of UK pension funds have collaborated with the High Pay Centre to develop a free-to-access online tool that helps investors assess companies’ annual corporate pay policies.

The Fair Reward Framework (FRF) has been developed as a response to the long-standing debates around corporate pay, and what can be frequent tensions between companies, shareholders and wider stakeholders about who and what within a company contributes to creating value and how that is rewarded.

The FRF was initially convened by the Church of England Pensions Board and Brunel Pension Partnership, in partnership with the High Pay Centre, which now acts as the FRF Secretariat. It has been developed with the input and support of a group of UK asset owners (including Friends Provident Foundation, Local Pensions Partnership Investments, Nest, People’s Partnership, Railpen, and Scottish Widows) who identified that there was a significant gap to address in being able to freely access clear, comparable data on how value creation is rewarded across different corporate stakeholders.

At launch of the pilot on 12 September 2024, assessments were available for 65 of the FTSE100 companies – with the full FTSE100 to be published by early 2025. Companies’ annual corporate pay policies and practices are assessed through a 30-point framework comprising indicators including CEO pay awards, pay gaps and ratios, pay scrutiny processes such as worker consultation, the extent of trade union coverage and the results of recent shareholder votes on pay at company AGMs. Company assessments will be updated on an ongoing basis following annual reporting cycles, with companies having the opportunity to comment on their draft assessment ahead of its publication.

Some of the key trends observed among the FTSE100 companies that have been assessed by the FRF to date include:

• The median CEO pay was £4.1m with awards ranging from just under £1m to £17m.
• The median CEO to median employee pay ratio across the sample was 75:1, while the highest was 431:1 and the lowest 13:1.
• 57% of analysed firms are accredited living wage employers in the UK. 
• 40% of analysed firms have disclosed their Ethnicity Pay Gap.
• Only 22% of analysed companies provided any evidence of the proportion of their workforce covered by trade union membership or a collective bargaining agreement. 
• Only 6% disclosed details of any meaningful consultation with their workforce during the executive pay setting process.
• 34% of Remuneration Committees had exercised discretion within the past two years in adjusting pay awards, with the majority of these being downwards.
• 23% of analysed companies have experienced significant shareholder dissent on a remuneration-related vote at a shareholder AGM in the past three years.

(FRF, Fair Reward Framework launches tool to reframe the debate on executive pay, 12.09.2024) 

LAPFF: Investors call for say on climate vote at AGMs

On 11 September 2024, it was announced that a group of investors have called on 76 FTSE 100 companies to present their climate transition plans for investor approval. 

The Local Authority Pension Fund Forum (LAPFF), supported by other investors, has written to the chairs of FTSE 100 companies that have not held a vote on their climate transition plans in the past three years to set out expectations ahead of next year’s AGM season. 

The group believes these companies are not adhering to best practices as around 20% of FTSE 100 companies, excluding investment trusts, have already provided shareholders with the opportunity approve their climate plans. In addition, emerging guidance, including from the Transition Plan Taskforce, also recommends that company’s climate plans are produced and updated every three years. 

Investors expect companies to present credible transition plans with Paris-aligned targets and detailed strategies for achieving those goals. The group has urged companies to outline their climate strategies within these transition plans and include material climate-related impacts in their financial statements so shareholders can make informed investment and stewardship decisions. 

The group believes specific votes on such climate transition plans allow shareholders to express support for the plans and the associated capital expenditure requirements, as well as their confidence in the plan. 

(LAPFF, Investors call for climate strategy vote at UK’s largest listed companies, 11.09.2024)

TNFD: The TNFD supports the use of cross-reference tables for corporate reporting

On 16 September 2024, the Taskforce on Nature-related Financial Disclosures (TNFD) announced its support for the use of cross-reference tables in corporate reporting to help simplify and streamline the presentation of TNFD-aligned recommended disclosures in existing voluntary or mandatory corporate reporting. 

The TNFD points out that cross-reference tables can be attached to an organisation’s reporting to show the alignment of sustainability disclosures, including data points, with the TNFD recommendations and metrics. It believes that the use of cross-reference tables can help to reduce report preparer costs, avoid duplicative reporting and make information easier and more efficient for report users to find, provided there is no loss of quality in the disclosures being made consistent with the respective recommendations and standards. 

The TNFD notes that while each organisation needs to determine its own approach to the presentation of material sustainability-related information, whether in combined or separate documents, the use of cross-reference tables can enable corporates and financial institutions to adopt the TNFD recommendations without the need to create a separate TNFD report. To support TNFD cross-reference tables with the Global Reporting Initiative (GRI) Standards and the European Sustainability Reporting Standards, the TNFD points out that report preparers can use the two joint correspondence mappings recently published by the TNFD with GRI and European Financial Reporting Advisory Group (EFRAG). 

An example of a cross-reference table template is provided in the announcement as an illustration, but organisations can adapt this to fit their own needs and context. 

(TNFD, Supporting the use of cross-reference tables for corporate reporting, 16.09.2024)

DBT: Reporting requirements on business payment practices and performance - updated guidance

On 19 September 2024, the Department for Business and Trade published updated guidance (Guidance) on the statutory reporting requirements relating to business payment practices and performance which apply to qualifying UK companies and limited liability partnerships (LLPs). Changes made include: 

• An amendment to the definition of "balance sheet total" for the purpose of determining whether a company or LLP exceeds two or all of the thresholds for qualifying as a medium-sized company (and is therefore within scope of the statutory reporting requirements). 
• Updating the Guidance to refer to additional reporting requirements introduced by the Reporting on Payment Practices and Performance (Amendment) Regulations 2024. 
• Providing additional guidance on the meaning of "receipt of invoice”. 
• Changes to the Guidance on reporting statistics when supply chain finance is used. 

(DBT, Business payment practices and performance: reporting requirements, 19.09.2024)