You are using an outdated browser. Please upgrade your browser to improve your experience.

Our views 28 March 2023

Proxy season and the cost-of-living crisis: A sneak peek into things to come

5 min read

The past few years have borne witness to a myriad of global events, ranging from a pandemic, rising geopolitical tensions, energy crises and now a cost-of-living crisis.

The economic and social landscape is rapidly developing and with the approaching 2023 proxy voting season in April-May, we have an opportunity to assess and cast our vote on how companies have responded.

Inflation rates hit record levels in the last quarter of 2022 and have since seen only a marginal decrease, affecting the affordability of everyday goods and services in the process. Various stakeholders, such as employees, workers, and shareholders, are increasingly conscious of seeing their interests reflected in corporate decision making. Increasing industrial actions over pay and working conditions, for example, shows employees are understandably anxious to keep salaries in line with rising prices.

The 2023 voting season

This year we will see the majority of UK companies’ remuneration (pay) policies put to a vote, following the required three-year cycle. Ahead of these policy renewals, remuneration committees are keen to gain consensus with their major shareholders by gathering feedback through consultations and roadshows in the run up to the start of UK voting season in April. The areas of focus in these consultations have varied, from the introduction of ESG metrics into incentive plans (particularly climate), to increases in quantum for executives in the aftermath of years of Covid-19 related salary sacrifices.

Encouragingly, many companies are conscious of the effect of the cost-of-living crisis on the lowest paid and have opted to offer additional financial assistance through lump sums or increased salaries. Some businesses have taken things a step further, putting in place initiatives providing mental health and financial planning support. The companies that have not openly disclosed plans for their workforce will be under close scrutiny this voting season – particularly if they are also attempting to increase pay for those at the top.

Until recently, salary increases for executive directors were considered reasonable if limited to the rate given to all employees. This position has changed of late with industry bodies such as the Investment Association calling for the rate of executive salary increases to be lower than those for employees. The nature of management compensation packages, which alongside a base salary include variable elements based on a percentage of salary; means that any hike in salary will have a spiralling effect on final outcomes. This is at odds with the opportunities offered to the average employee.

Where do we go from here?

Royal London Asset Management is purposefully nuanced in the way we approach voting, and we will assess every pay vote on a case-by-case basis. We factor in companies’ unique circumstances, RLAM’s internal views and research, and findings from any company engagement. For this reason, we will not put in place a blanket policy of voting against all companies that exceed a certain threshold. Instead, we will assess each company’s actions in the round.

In the run-up to the 2023 voting season we have been refining our views and speaking to our fund managers, gaining a clear agreement on how we should approach this. Where management pay increases are not fairly reflected across the lowest paid in the workforce, we may reflect this in our vote on executive pay or on board director re-elections. In essence, we expect detailed justifications from companies on their chosen approach.

As responsible investors we know the onus is on us to encourage businesses to always consider their stakeholders when making decisions. We believe that a motivated workforce plays a key role in the long-term success of a business. This is why our approach will look beyond just a headline pay decision, to understand how a company is going to reward and motivate all employees rather than just a chairman or CEO.


This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. Portfolio characteristics and holdings are subject to change without notice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.


Related content