BlackRock demands UK businesses control executive pay rises

Asset management firm BlackRock has told 300 UK businesses that they should extend pay rises given to executives to other workers, or they could face a rebellion from shareholders.

BlackRock has a stake in every FTSE 100 company, and many of Britain's largest businesses have been sent a latter by the US firm demanding cuts to massive pay rises for bosses.

The fund manager said it would only approve raises based on a similar deal being given to workers on a lower income, according to the letter.

BlackRock currently has over $5trn worth of assets on its books, and carries a major influence in boardrooms globally.

Its head of investment in Europe Amra Balic said in the letter that salaries should be directly 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.

The letter was first reported by The Sunday Times, and shows further signs of shareholder activism, following last year's rejection of a £14m pay package for the chief executive of BP.

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

Since the global financial crisis in 2008, executive pay has become a significant issue, with British Prime Minister Theresa May promising in November that she would tackle the problem.

"We have seen an irresponsible minority of privately held companies acting carelessly – leaving employees, customers and pension fund beneficiaries to suffer when things go wrong," May said.