With the warmer UK weather, the corporate governance jargon begins to bloom again. The term ‘shareholder spring’ has made it repeatedly into media coverage of a spate of annual general meetings (AGMs) of publicly listed companies. But it has also been noted that binding shareholder votes on future pay – which have only just come into effect – have not delivered any major upsets. This seems to imply that they are in some way a pointless exercise: more ‘show’ than ‘substance.’
It depends on your perspective. Is it a corporate governance glass half-empty or a glass half-full ?
The measures introduced by the UK’s Business Secretary Vince Cable were designed to make a clear link between pay and performance at a time of acute frustration around levels of pay. Under them, a firm’s remuneration policy requires the approval of more than 50% of shareholders for a policy to pass. It is all about holding quoted companies to account, again and again – and in public.
In the AGM season, there has already been a spate of protest votes – at Barclays 34% of shareholders failed to back the board on its remuneration plans. London-listed Standard Chartered bank found 40.8% of investors had voted against its pay plans. The ‘irritation’ expressed by some in the boardroom at this unseemly public display of dissent may well be a disruption that leads to change.
Nor is it just bankers whom ‘everyone loves to hate’ these days.
A third of shareholders at Pearson – the company that publishes the Financial Times – voted against its remuneration report. They were particularly angry, it seems, about a £1.15m discretionary severance payment to Rona Fairhead, the former CEO of the FT Group who left in 2013. That’s a very specific and personal sort of engagement by shareholders against a background of profit warnings by the company.
Astra Zeneca found its remuneration report rejected by 40% of those voting at its AGM. BP faced a revolt when shareholders refused to back a plan to treble CEO Bob Dudley’s pay package – a third voted against. At ITV, more than a quarter of investors failed to back the CEO Adam Crozier’s £8.4m pay and bonus package. As The Independent reports: “John Farmer, a small shareholder in many FTSE 100 companies, told the annual meeting: “I simply do not believe £8.4m is necessary.” Again, that’s very personal engagement from a small shareholder.
And let’s not forget Hiscox and BG Group – both have just faced shareholder revolts.
But – saving best for last – look at what just happened at Kentz – the FTSE 250 UK engineering group. It suffered the single biggest rebellion on pay so far, and became the first UK company to lose a binding vote. And it acted.
Listed companies have real people backing them. Shareholder votes will always be a frustrating means of change because not all shareholders will exercise them, and ownership is sometimes – indeed often – far afield.
But this UK ‘shareholder spring’ has a lot more human emotion – with clout – behind it than the last one.