The National Association of Pension Funds has set out new remuneration principles and more robust expectations for corporate accountability in its latest corporate governance policy and voting guidelines published today
The guidelines anticipate the introduction of major executive remuneration reforms and come ahead of the 2014 company reporting and AGM season. The NAPF said they provide greater emphasis on corporate reporting of extra-financial factors and encourage investors to utilise their full range of powers.
NAPF chief executive Joanne Segars said: 'The NAPF's priority is to maximise the long-term returns of our members' assets, irrespective of the potential for short-term discomfort.'
She added that the guidelines were aimed at supporting its members in 'promoting the success of the companies' they invested in, while ensuring the board and management of those companies were held 'properly accountable' to their shareholders.
'This year, we are more strongly encouraging companies to identify and engage with their long-term investors, rather than those on their register who are more interested in short-term trading,' Segars continued.
'We expect remuneration committees to set rewards which drive long-term strategic success and seek to reward performance over the longer-term - in most cases this will be longer than three years.'
The guidelines also place greater emphasis on the importance of safeguarding the independence of the external auditor reflecting growing concerns about the length of some auditor tenures. They include, for the first time, a cap on non-audit fees of 100% of audit fees or a material monetary sum of £500,000. If this cap is exceeded in successive years, investors are urged to vote against the chair of the audit committee or the audit fees, the NAPF guidelines state.
Elsewhere the refreshed encourage boards to explain to shareholders how they approach oversight and management of material extra-financial risks including reputational risks such as their approach to tax management.
The NAPF said future guidance would be updated annually to reflect the latest market best practice, investor expectations and regulatory changes.