View Online  

Investment Association
Revised Principles of Remuneration published

The Investment Association (IA) has today published revised Principles of Remuneration.

The IA has made quite a few changes to the Principles.  Many of the changes relate to the requirements of the revised Corporate Governance Code published in July 2018 (see our briefing here) and the new governance reporting requirements (see our briefing here).

We have picked out the key changes that you should know about below:


  • Remuneration Committees should establish a more substantial list of specific circumstances in which malus and clawback could be applied to awards.  The two current market standard triggers for malus and clawback (gross misconduct and misstatement of results) are likely to be rare and the IA believes that it can be challenging to rely on these triggers where it is difficult to point to individual culpability. Companies should therefore look to put in place a wider range of triggers which are more likely to be effectively applied.
  • The Principles directly address the issues that many companies have encountered when seeking to apply clawback to awards:

    o   Has the executive agreed in writing to the clawback provision?

    o   Is there consistency across the various documents (plan rules, employment contract, remuneration policy, communications to employees) so that clawback can be operated effectively?

    o   What is the correct process for determining whether clawback should be applied?

  • The revised Principles make clear how important it is for companies to make sure that they have dealt with all these issues upfront. The IA confirms that executives should sign a form of acceptance at the time of grant and that consistency across the documentation is very important. It also states that Remuneration Committees should develop clear processes for how they will exercise discretionary clawback.

Shareholding requirements and post-employment shareholdings

  • Post-employment shareholding requirements should apply for at least two years at a level equal to the lower of the shareholding requirement immediately before departure or the actual shareholding on departure.
  • Remuneration Committees should confirm what structures they have in place to ensure that post-employment shareholding requirements are maintained, eg by the establishment of employee ownership trusts or nominee accounts for the holding of shares.
  • Companies are expected to apply the new post-employment holding requirements to all new executive directors on appointment and to existing executive  directors at the earliest opportunity (and at the very latest by the time the company’s remuneration policy is next put forward for approval).
  • Unvested shares which are not subject to any further performance condition can count to the shareholding requirement on a net of tax basis – eg deferred shares awarded under annual bonus schemes can count on a net tax basis as can shares vested from a long term incentive award but which are still in their holding period.

Leavers and mitigation provisions

  • If the Remuneration Committee’s expectation is that an individual is retiring and on this basis it will treat that person as a good leaver under the relevant incentive plans, the committee should put in place appropriate mitigation provisions in case that individual does not, in fact, retire and goes on to take up a further executive role. This may require changes to plan rules and associated documentation.   


  • The 2018 Corporate Governance Code states that executive pension contribution rates should be aligned with those available to the workforce.  The IA considers that this means that executive directors should be given the same rate of pension contribution as that given to the majority of the company’s workforce.  New executive directors and any director changing role should be put onto this level of contribution when appointed to their role.  Current executive directors should have their contribution reduced over time until they meet this requirement and shareholders do not expect executives to receive any compensation for this change. Companies will need to consider carefully how to implement this requirement if the executive director  in question has a contractual entitlement to a certain level of pension contribution.

To discuss any of
the issues raised,
please contact:

Alice Greenwell 
+44 20 7716 4729 
E alice.greenwell@

Kathleen Healy  
+44 20 7832 7689
E kathleen.healy@

Nicholas Squire  
+44 20 7832 7419
E nicholas.squire@

Caroline Stroud   
+44 20 7832 7602
E caroline.stroud@





Follow us

This material is provided by the international law firm Freshfields Bruckhaus Deringer LLP (a limited liability partnership organised under the law of England and Wales authorised and regulated by the Solicitors Regulation Authority) (the UK LLP) and the offices and associated entities of the UK LLP practising under the Freshfields Bruckhaus Deringer name in a number of jurisdictions, and Freshfields Bruckhaus Deringer US LLP, together referred to in the material as ‘Freshfields’. For regulatory information please refer to

The UK LLP has offices or associated entities in Austria, Bahrain, Belgium, China, England, France, Germany, Hong Kong, Italy, Japan, the Netherlands, Russia, Singapore, Spain, the United Arab Emirates and Vietnam. Freshfields Bruckhaus Deringer US LLP has offices in New York City and Washington DC.

This material is for general information only and is not intended to provide legal advice.

Unsubscribe if you no longer wish to receive emails from Freshfields.

© Freshfields Bruckhaus Deringer LLP 2018