Investors confirm 2026 executive pay guidelines

The Investment Association (IA) has today reconfirmed its flexible approach to executive payment in its ‘Principles of Remuneration’ for 2026, maintaining that companies must also provide tailored rationales for pay structures.

The Principles, which outline IA member views on the commonly accepted approach to executive pay for the majority of companies, were updated last year to offer greater flexibility to companies to adapt pay structures to best suit their business and strategy, when accompanied with suitable explanation.

IA members, as investors responsible for £10 trillion assets under management, want a competitive UK listing environment that attracts high quality companies to list and operate in the UK, while delivering long-term value for their shareholders. 

The market has responded positively to the revised Principles over 2025, with companies welcoming the flexibility to pay appropriate remuneration in order to attract, retain and motivate talent whilst meeting shareholder expectations.

The IA has therefore identified a small number of areas where investors feel the implementation of the new Principles can be further improved, without changing the overall approach:

• Company specific rationales – explanations should be more company specific, providing high-quality information why decisions are made, why it is right for the company’s business’ strategy and how it will impact its future success.
• Benchmarking – The Principles state that investors analyse levels of remuneration on a case-by-case basis.  Investors encourage companies to provide benchmarking analysis as part of their initial consultation with their investors. This will allow for greater transparency and constructive dialogue at an earlier stage of the consultation process.
• Hybrid schemes – while the Principles provide the flexibility for companies to consider hybrid schemes. IA members generally remain cautious about the use of hybrid schemes which seek to balance certainty and retention against performance alignment.
• Bonus deferral – the Principles acknowledge that companies can take a proportionate approach, if an executive has built up a significant long-term shareholding, a reduced portion of their annual bonus might be deferred into shares. Members do not expect companies to remove completely the deferral mechanism once shareholding guidelines have been met, as the bonus deferral offers an important mechanism to operate malus & clawback provisions.
• In-flight awards – the integrity and credibility of share schemes are compromised if there are retrospective changes or retesting of performance or vesting conditions. Remuneration committees may wish to use discretion to make adjustments to in-flight awards in exceptional circumstances, but this needs to be clearly justified subject to consultation and supported by shareholders.

Andrew Ninian, Director of Stewardship, Risk and Tax at the Investment Association, said: “The continuity in approach in the Principles demonstrates the robust and future-looking nature of last year’s changes to offer companies greater flexibility to adapt executive pay to best meet their business structures. Investors want to incentivise delivery of long-term performance, and our guidelines set out how companies can achieve this in terms of their reward structures.

“As we prepare for the 2026 AGM season, investors will continue to expect remuneration committees to demonstrate a strong link between pay and performance and for firms to provide company-specific rationale for their chosen approach to remuneration. As geo-political uncertainties, cost of living pressures and the impact of National Insurance changes on businesses continue, investors will be keen to understand how companies reward executives for their performance, while balancing consideration of outcomes for employees, customers and other stakeholders.”

Non-executive director remuneration

The approach to non-executive director (NED) remuneration set out in the Principles also remains unchanged. Independent NEDs should be adequately compensated for their contribution to boards that reflects their time commitment, role complexity and experience. NEDs can own shares, with a portion of fees potentially paid in shares at market rates. In line with the UK Corporate Governance Code, performance-related pay is not appropriate for independent NEDs.

Note to Editors 

For 'The IA's Principles of Remunerations', please click here.

For this year's letter to the IA's Remuneration Committee Chair, please click here.