Shareholder revolts against remuneration reports look on course to increase significantly, according to figures from the Investment Association.
By the end of July this year, the Public Register of shareholder resolutions had logged 41 companies that had seen votes of 20% or more against their remuneration reports, compared with 37 for the same period last year, and just 43 in the whole of 2017.
The Financial Times reported that that the period to July saw 18 FTSE 100 companies suffer significant opposition to remunerations reports, compared with nine in 2017.
Increase in revolts
The Public Register records votes of 20% or more. But the size of revolts has increased. In 2017 the biggest revolt was against the remuneration report of Pearson PLC, at 65.59%. This year, Royal Mail was punished by a 70.17% vote, plus 7.63% abstentions. Shareholders at Petropavlovsk posted a 71.54% vote in opposition to its pay report, with 17.6% withholding their vote, taking the revolt to almost 90%.
Persimmon—which made headline news when chief executive Jeff Fairburn received a £110m payout, prompting public criticisms and the resignations of the board chair and the remuneration committee chair—recorded a 48.52% revolt with 30.94% abstaining. In August the High Pay Centre released figures showing that median pay for FTSE 100 chief executives had risen by 11% in 2017, to £3.93m per year.
The High Pay Centre’s report said that “our findings strengthen our conviction that more meaningful change to policy and practice are needed in order to achieve full stakeholder confidence in executive pay practices.”
Across the Atlantic chief executive pay has also risen, with a think-tank in Washington, the Economic Policy Institute (EPI), finding that pay had grown 17.1%, establishing a CEO-t0-worker pay ratio of 312 to 1, rising again though not as high as the peak in 2000 when it reached 344 to 1.
A report from the EPI said: “CEOs are getting more because of their power to set pay, not because they are more productive or have special talents or more education.
“If CEOs earned less or were taxed more, there would be no adverse impact on output or employment.”
Meanwhile, Deloitte, a professional services firm, also spotted the trend in investor revolts. Deloitte figures showed that 22% of companies received less than 80% support for their remunerations reports, compared with only 6% last year.
Stephen Cahill, vice chairman at Deloitte, said 2018 had bee a “much more challenging voting season” because of a tougher stance on pay, particularly on companies viewed as repeat offenders.