More companies see pay pressure
The 2012 UK AGM season continues to see companies facing sizeable votes against pay in particular.
Last week car dealer Pendragon became the third company this year to see its remuneration report defeated, and by a large majority, with a 67% vote against. Despite the scale of the defeat it’s actually only the second largest this year, with Central Rand Gold having suffered a 75% vote against in April.
But it’s the string of companies facing votes against of 20% and above that seems new this season. Trinity Mirror was a favourite to face a challenge, and indeed suffered a vote against of just under 46%. Add in abstentions and it failed to secure a majority in favour of its remuneration policy. UBM came close, with 36% against and abstentions pushing the total not in favour to 46%.
Amongst the other companies in the firing line over pay last week were Mecom (35% against, 42% not in favour), Sportech (24.5% against), Clarkson (20.7% against), Petrofac (20% against share scheme resolution) and Omega Insurance Holdings (15.8% against).
It is still early days, and we would caution reading too much into a handful of dramatic results. In the background many companies are passing their remuneration policies with very solid majorities in support. We’ll have to wait until the end of the season to say whether there really has been a widespread challenge.
There will also, of course, be a backlash from the business lobby and there are signs that it has already started. As we have noted previously in PIRC Alerts, corporate lobbyists are pushing hard to weaken Vince Cable’s set of reforms. The most noise has been expended around the binding vote, but it’s clear that the one idea that they really hate – and are most likely to succeed in killing off – is that of requiring a higher threshold to pass remuneration votes. This will be a key test of the balance of forces in the executive pay debate and, to be blunt, we are not optimistic.
The language in some quarters is becoming increasingly antagonistic, with one (anonymous) member of the Government’s business advisory group warning that the Coalition had “poisoned the well” for FTSE directors by encouraging shareholders to tackle executive pay. We also know that some companies are becoming more, ahem, assertive in their PR work around their AGMs. Our ears are burning…
Whilst we’re on the subject of language, perhaps the events of this season give us an opportunity to re-think the way that shareholder engagement with companies is characterised. As we noted last week, one of the things that is different this year is an apparent willingness on the part of more shareholders to use their voting rights. But the fact that shareholders are using rights that they already had (but have long neglected), rather than taking personal risks to demand new rights, should be reason enough to query the ‘shareholder spring’ tag.
Finally, perhaps this season should also start to kill off the idea that shareholders are being ‘strategic’ by voting in favour but expressing concerns privately. No doubt companies reluctantly receive shareholder votes in such cases and feel suitably ashamed as they continue to exercise power. But we hope that this season has demonstrated to shareholders that voting against things you disagree with is often the best approach to take.