Fair pay

How we've worked with the companies we invest in to help ensure they are rewarding their employees fairly.

Case study

Fair pay - looking at how senior company executives are rewarded

What was the issue?

Executive pay is always a hot topic. Executives are the senior managers in a company, such as the Chief Executive Officer (CEO). These people have a crucial role in making important decisions and leading companies, so they are often quite highly-paid.

Railpen has the right to vote on various matters relating to the management and policies of some of the companies it is invested in. This includes supporting or refusing to support a company’s remuneration approach – how much these executives should be paid in salaries, bonuses and other rewards. 

While looking at the report on the proposed remuneration approach at one of our investee companies, we spotted two issues: 

  • The amount of pay being proposed for the CEO and other executives was high, compared to other executives at the same level at similar companies, and;
  • The CEO was in a final salary pension scheme where the company was paying a high level of contributions compared to not only those for similar roles at similar firms, but to the rest of the firm’s employees
What did we need to do?

We needed to vote on whether we approved of the remuneration report at the company’s Annual General Meeting in 2024.

We had to think about how our vote could have the most influence on improving Sustainable Ownership issues at the company.

What approach did we take?

Fair pay for executives is one of the most important things we think about when it comes to how the companies we invest in are managed. 

We believe that excessive pay and rewards for top managers are not right if they are not proportionate. We don’t think it’s fair if executive pay is out of line with how the rest of a company’s employees are rewarded. This can demotivate employees and reduce trust, which can affect a firm’s financial performance – and this wouldn’t be good for investment returns for Railways Pension Scheme members. 

So Railpen’s Voting Policy says we’ll vote against a resolution at a company where pay is excessive, poorly structured or unfair. We’ll also vote against companies where senior executives are getting a pension that is much better than other employees.

 

What was the outcome?

We voted against the remuneration report because of these concerns. Overall, shareholders voted to approve the remuneration approach, but an unusually high number of shareholders, alongside Railpen, voted against the remuneration approach. We will monitor developments at this company closely in future years.

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