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CEO of the London Stock Exchange (LSE), Julia Hoggett, has called for a ‘constructive discussion on the UK’s approach to executive compensation’,  UK companies to increase executive pay packages and to match global benchmarks. Hoggett argued that the UK’s inability to do so has made it difficult to attract and retain executives. Hoggett places some blame on proxy agencies and some asset managers who vote against higher executive pay in the UK, while supporting much higher compensation packages in different jurisdictions such as the US:

‘We should be encouraging and supporting UK companies to compete for talent on a global basis, so we remain an attractive place for companies to base themselves, stay and grow. The alternative is we continue standing idly by as our biggest exports become skills, talent, tax revenue and the companies that generate it’.

The comments came shortly after the Financial Conduct Authority (FCA) proposed changes to the listing regime to make the rules more effective, competitive and easier to understand. The proposed changes include replacing the ‘standard’ and ‘premium’ listing segments with a single category for equity shares. A single category would remove the criteria that may discourage new companies, eliminate the requirement for shareholders to vote on certain transactions, such as acquisitions, in order to reduce obstacles for companies trying to implement their business strategies and allow greater flexibility and leniency when it comes to dual class share structures. FCA CEO, Nikhil Rathi, commented on the announcement:

'We want to encourage more companies to list and grow in the UK, versus other highly competitive international markets'.

While the proposed changes are welcomed by the market, they do not address executive pay, and there are recent concerns that the significant gap between UK and US executive pay may mean that companies will choose to list in New York instead of London. SoftBank’s Arm Holdings recently opted to list on the New York Stock Exchange, despite the UK government’s several attempts to persuade it to apply for a public listing in London. In recent years, there has also been a trend of UK executives leaving for higher-paying positions in the US, which has been viewed as a contributing factor to the exodus of companies choosing to list in New York over London. This trend is exemplified by high-profile departures such as former BT CEO Gavin Patterson's move to the US in 2019 and Laxman Narasimhan's departure from Reckitt Benckiser, where he was paid $7.5 million, to join Starbucks for a salary of $17.5 million. Similarly, Namal Nawana was forced to leave Smith & Nephew due to his request for higher pay, which was in line with US corporate packages, not being feasible under UK corporate governance standards.

With the AGM season in full swing, remuneration is a hot topic causing some dissent among shareholders. Shareholders of various companies have voted against the directors' remuneration report, with some narrowly avoiding a significant no vote. Companies like Ocado, BP and CentralNic, saw a significant percentage of investors vote against the remuneration report with 30%, 18% and 24% of no votes respectively. The resolution on the directors’ remuneration report failed for companies such as Plus500 plc (75% of no votes), and Unilever plc (58% of no votes). Shareholders have expressed their dissatisfaction with the board and remuneration due to various reasons, including lack of environmental responsibilities and transparency. For more on the AGM season, see our new series, ‘AGM season 2023—Week in review’, which looks at key developments across the AGMs held each week. Click here to access the latest update.