High pay, low pay, and the rise of AI
As median CEO pay across many European indices begins to outpace the FTSE 100, speakers at DMI’s recent Stewardship Series conference in London argued that the U.K. market is grappling with its own distinct cultural and structural barriers when it comes to modernizing executive compensation. With international competition—particularly from the US—heating up, boards and investors alike are wrestling with how to remain competitive while staying within the U.K.’s tight pay norms.
A more difficult landscape for change
The November 11 invite-only event heard that moves by the U.K. to modernize pay to consider alternatives such as restricted share plans or hybrid models amid such strict pay norms can present a challenge for compensation committees. “I think if you look across Europe, there’s more shareholder concentration and therefore it’s easier sometimes to get things through," Stephen Cahill, partner at Farient Advisors, told delegates. “In the U.K., however, often we have much more diversified shareholder bases, therefore getting that level of backing is more challenging."
Finding alignment with longterm shareholders
The session heard that investors want to see companies paying fairly and competitively but are more willing to give well-governed boards more flexibility if a thoughtful and transparent process has been demonstrated.
Companies were advised to examine what structure would best align with long-term shareholders while also focusing on transparency and what is being incentivized. “Just give executives long-term, time-restricted stock – five-to-10 years vesting regardless of resignation or retirement. It is the simplest, cleanest way of aligning and incentivizing," said Amy Wilson, head of stewardship at Norges Bank Investment Management.“ We are often wrongly quoted as not supporting performance-based pay, but we would argue that long-term exposure to the share price is performance-based."
Boards looking to present a new pay policy – especially one involving increased executive pay – should provide detailed disclosure and rationale around why the increase is warranted and how that applies to its business strategy. Without such an approach, compensation committees are likely to invite increased scrutiny and potential protest votes.
Generic justifications that suggest "everyone is doing it" will not satisfy investors.
What to incentivize and what not to
The discussion also touched on the role of non-financial metrics. While many companies have incorporated ESG-related measures, it was argued that not every strategic priority needs to sit in the incentive framework. The message: compensation design should be business-specific, not a tick-box exercise.
“Our approach is to have a strong link between pay and performance. We review annually whether ESG metrics should be included in our incentive framework," said Anne-Sophie Blouin, who heads up rewards at RELX. “Some metrics like diversity and engagement for example are very important and the board receives detailed updates on these, but these are not included in our incentive framework.”
From high pay to low pay
From high pay to low pay, another session saw the conversation shift to the workforce where pay inequality and living wage commitments were also cited as among the areas to draw increased investor focus amid a cost-of-living crisis with ShareAction pointing to its recent campaign targeting the retail sector.
The panel heard that low pay can create turnover, operational disruption, and reputational risk—issues increasingly viewed as material to investors.
Moving to the importance of the worker voice, Tom Powdrill of Social Governance Solutions added that employees can be a critical source of insight into operational risks and efficiencies. “Employees often know where operational issues or inefficiencies lie, or what causes frustration in the workplace. That’s valuable intelligence.”
The social-governance focused panel also addressed emerging challenges around AI while emphasizing the importance of strong internal structures to help companies navigate such fast-moving technological change. "Investors are in a much stronger position to engage effectively if companies have the right people, structures, systems, and processes in place to help navigate the uncertainties and fast-moving developments in AI," Caroline Escott, head of investment stewardship at Railpen, told the event.
Preparing for a new chapter in the UK Stewardship Code
As the Financial Reporting Council (FRC) prepares to roll out the new UK Stewardship Code in 2026, another panel discussed the various changes and how they aim to reduce the overall reporting burden going forward. "We hope to see clearer, more focused reporting. We want stewardship teams to have confidence to tell their story, not simply produce boilerplate text or try to guess what the FRC wants," said Ruth Nash, project manager at the FRC." The key point is that the fundamentals of what we expect haven’t changed dramatically. We want clear, consistent reporting and an understanding of how stewardship is applied in practice."
Reflecting on the event, Diligent’s Editor-in-Chief Josh Black noted that the insights from the three stewardship-focused panels offered companies a sharper sense of how investor expectations are evolving. "As we approach proxy season, investors are looking for demonstrated board oversight of emerging risks while also encouraging companies to pursue sustainable growth. Well-informed engagement can lead to a successful partnership."
The Stewardship Series' next stop will see the event return to New York in the first quarter of 2026. For more information on sponsorship opportunities, get it touch here.
