Amongst its recommendations, the IA wants companies to take action on the levels of pay, and for them to disclose pay ratios between the CEO and median employee, and the CEO and the executive team. It says this will provide investors with the context they need to understand the scale of the awards been given.

The letter states that the IA has now rewritten its own principles of remuneration to ensure that they do not promote a single remuneration structure above others to enable companies to choose the appropriate structure for their business and strategy, rather than automatically opting for the commonly used long term incentive plan (LTIP) structure.

The updated principles also make it clear it is essential that company boards provide investors with clear justification around their executive’s levels of pay. This should be both in terms of the maximum potential remuneration as set out in the remuneration policy, but also payments actually made to the executive during the year in the context of the company’s performance.

It also raises the issue of the disparity of pension provision between the executive and the rest of the company workforce, noting ‘the lack of progress which has been made on this issue’. The association says that where contribution rates for executives and the general workforce differ, the differences should be clearly justified in any reporting.

Alongside the updated principles, the association has also informed companies of the need to improve shareholder consultation on remuneration issues and to ensure that this engagement is based upon how pay is in line with the company’s strategy.

The IA says its corporate governance research unit analyses companies across the FTSE and will be monitoring them against these new principles and will highlight areas of concern to investors ahead of voting at company meetings.

Andrew Ninian, the IA’s director of corporate governance and engagement, said: ‘Issues surrounding executive pay are a growing concern for investors, politicians and society as a whole.

‘The increasing complexity of remuneration structures has been the driving force behind these issues and our new principles are designed to offer a market-based solution to add simplicity and flexibility. It is vital that companies have the opportunity to choose the right structure for their business and this must be done in close partnership with their shareholders.

The Investment Association’s open letter can be viewed here.

The IA’s principles of remuneration can be viewed here.