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The Investment Association (IA) has published its annual letter to Remuneration Committee Chairs on key issues on remuneration ahead of the 2026 AGM season.
In its letter, the IA has confirmed that it will not be making changes to its Principles of Remuneration, which were significantly overhauled and updated in 2024 (see our blog post here for further details). The IA is pleased with the way in which remuneration committees have embraced the revised Principles and believes that the market has also responded positively to them.
The letter focuses on a handful of areas where the implementation of the revised Principles could be improved, including:
- ensuring that company-specific explanations for remuneration proposals are provided in the remuneration disclosures, rather than generic or boilerplate rationales such as "competitiveness against peers" or the need to "attract and retain talent";
- how benchmarking should be carried out when assessing remuneration increases;
- when and how hybrid schemes should be introduced, with early consultation with investors recommended where this is being considered; and
- the importance of early engagement and consultation with investors in relation to any material changes. The IA will be developing two initiatives to help support the consultation process – creating a directory of IA member contacts for remuneration consultations and re-establishing collective meetings on remuneration proposals. It will provide more details on these initiatives shortly.
On non-executive director (NED) remuneration, the IA notes that shareholders encourage independent NEDs to align their interests with investors through owning shares. A portion of their fees can therefore be paid in shares at the market rate. However, in line with the UK Corporate Governance Code, the IA views performance-related pay as inappropriate for NEDs (see our blog post here on recent changes to the UK Corporate Governance Code Guidance in relation to NED pay).
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