BlackRock demands cuts to executive pay and bonuses

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World’s largest fund manager threatens shareholder rebellions, warning UK companies they must match boardroom pay rises with that of workers. The world’s largest asset manager is threatening to unleash a fresh wave of shareholder rebellions in the UK unless Britain’s largest companies rein in excessive boardroom pay.

BlackRock is demanding cuts to director pension entitlements and an end to huge pay rises as UK companies prepare to put their latest pay deals to shareholders.

In a letter to the bosses of more than 300 UK companies, the US fund manager said it would only approve salary rises for top executives if firms increase workers’ wages by a similar amount. It is a significant intervention from a company which is a shareholder in every business listed on the FTSE 100 index. BlackRock has $5.1tn (£4.2tn) of investments and describes itself as the world’s largest fund manager.

The company’s head of investment stewardship in Europe, Amra Balic, said in the letter that a failure to meet the standards outlined by the fund manager would call into question the quality of the board.

She said pay must be linked to performance. “Executive pay should be strongly linked to performance, by which we mean strong and sustainable returns over the long-term, as opposed to short-term hikes in share prices,” she said.

“We consider misalignment of pay with performance as an indication of insufficient board oversight, which calls into question the quality of the board. We believe that shareholders should hold directors to a high standard in this regard.”

About half of Britain’s biggest quoted companies face binding shareholder votes on their pay plans in 2017. One of the issues highlighted by BlackRock is the gap between the pay rises handed out to the most senior executives, and those awarded to the rest of the workforce.

The fund manager said: “In case of a significant pay increase year-on-year that is out of line with the rest of the workforce, BlackRock expects the company to provide a strong supporting rationale. Large increases should not be justified principally by benchmarking.”

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