Hermes Proposes CEO Salary Cap for Biggest British Companies

Hermes Investment Managers is proposing Britain’s largest companies impose a ceiling on the salaries of their chief executive officers.

The London-based money manager, owned by BT Pension Scheme, has sent draft proposals on pay to the remuneration committees of companies in the FTSE 350 Index, a spokeswoman confirmed Friday. The report will published by the end of the month.

“There are significant problems with executive remuneration in the U.K,” Hans-Christoph Hirt, co-head of Equity Ownership Services at Hermes, said in a statement. “Now is the time for investors to articulate their expectations and work together with companies to reform executive remuneration.”

Investors in British companies from BP Plc to Anglo American Plc rebelled against multi-million-pound CEO pay packages earlier this year. Lloyd’s of London CEO Inga Beale said this week that finance executives should consider slashing their own paychecks to win back the trust of people who have lost faith in large businesses.

Hermes is proposing that companies should publish the maximum that a CEO could earn, which would then be discussed with investors. “We want to see simpler packages, lower variable pay, much higher shareholding requirements and stronger accountability of remuneration committees,” Hirt said.

The company is also recommending that executives at FTSE 100 companies should hold shares valued at five times their base salary, higher than the level proposed by other fund managers.

Hermes has 188.8 billion pounds ($230.2 billion) in assets under advice including 26 billion pounds under management. The company’s proposal on pay was earlier reported by Sky News.

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