Skip to content

11 July, 2025

  • Saved Articles
  • My Account
  • Subscribe
  • Log In
  • Log Out

Board Agenda

  • Governance
  • Strategy
  • Risk
  • Ethics
  • News
  • Insight
    • Categories

      • View all
      • Governance
      • Strategy
      • Risk
      • Ethics
      • Board Expertise
      • finance
      • Technology
    • EU sustainability

      Omnibus package must not undermine EU sustainability

      Now is the time for Europe to speed up green transition, rather than slow it...

    • high pay

      Pay gap transparency needs to be better

      It’s not unknown for a CEO to earn 500 times as much the median employee,...

    • executive pay

      Executive pay trends in 2025

      Opposition to remuneration reports has grown sharply, according to Georgeson’s analysis of voting outcomes in...

  • Comment
      • View all
    • EU sustainability

      Omnibus package must not undermine EU sustainability

      Now is the time for Europe to speed up green transition, rather than slow it...

    • high pay Pay gap transparency needs to be better

      It’s not unknown for a CEO to earn 500 times as much the median employee,...

    • future-proof governance levers How to future-proof your business

      For boards to bolster resilience and create value in a polycrisis, a combination of hard...

  • Interviews
      • View All Interviews
      • Podcasts
      • Webinars
    • UK Corporate Governance Code Board meetings ‘are not up to scratch’

      Nearly three-quarters of board members believe the board’s performance in meetings needs improvement, an expert...

    • financial sanctions Tariffs chaos drives boardroom focus on resilience

      Business leaders will prioritise the resilience of their organisations in the face of economic upheaval...

    • supply chain oversight Act now on supply chain oversight, boards warned

      Board directors need to critically engage with the business’s supply chain activity, a panel of...

  • Board Careers
  • Resource Centre
      • White Paper Downloads
      • Book Reviews
      • Board Advisory & Corporate Services
    • C-suite barometer: outlook 2025 – UK insights

      Forvis Mazars draws UK insights from its global study and looks at UK executives’ strategic...

    • Talent Management 2025 Mind Gym

      Talent Management in 2025

      From rethinking leadership to wrestling with AI, MindGym's report reveals the trends shaping talent strategies...

    • Korn Ferry CHRO 2025 (Copy)

      On The Highwire: Being a CHRO in 2025

      Korn Ferry surveyed 750 senior HR leaders (including 450 CHROs) to understand their key priorities...

  • Events
  • Search by topic
    • Governance
    • Strategy
    • Risk
    • Ethics
    • Regulation
    • ESG
    • Investor Relations
    • Careers
    • Board Expertise
    • finance
    • Technology

Say-on-pay votes lack link to sustainability

by Gavin Hinks on September 21, 2023

Very few investors use their AGM votes on executive pay as a spur to improve the company’s ESG performance, research shows.

say-on-pay votes

Image: koonsiri boonnak/Shutterstock.com

Say-on-pay voting—those shareholder votes on remuneration at company AGMs—is not being used for “steering companies toward a more sustainable path”, according to new research.

The conclusions come from London School of Economics law professor Suren Gomtsian after placing investor votes and their reasons under a microscope.

The study looked at voting patterns from 2013-2021 and found that few investors—there are exceptions—have used their votes on executive pay to boost corporate performance on ESG.

In an article for the Oxford Business Law Blog, Gomtsian writes: “Say-on-pay is largely an unused tool in the quest of steering companies towards a more sustainable path: except for a small number of asset managers and pension funds… investors do not at present demand linking executive pay with environment or social targets on a broader scale.”

He adds that, on the other hand, investors do not oppose the use of pay as a tool to promote ESG performance.

Gomtsian’s findings come amid other research that indicates executive pay remains the greatest focus for shareholder dissent at AGMs across Europe. And while median pay for CEOs in the FTSE 100 continues to grow, the High Pay Centre, a think tank, said in its most recent report last month that CEO median pay rose 16% from 2021 to 2022, and now stands at 118 times that of the median UK full-time worker’s pay.

Competitive remuneration

That said, some in the City have tried to prompt a debate on potentially further raising CEO pay levels to compete with remuneration in other markets.

Reports towards the end of last year suggested some jurisdictions were beginning to link pay and ESG, most notably the US. A US think tank, the Conference Board , said research suggested 73% of S&P 500 companies tied pay to “some form” of ESG performance.

Elsewhere, research from London Business School suggests 45% of FTSE 100 companies have an ESG target in variable pay components of executive wages.

While that might be the case, Gomtsian’s researchers are yet to find ESG and pay a cause of voting dissent. Only one in five (20.7%) said in 2021 that ESG and pay was a reason for the way they voted. Though that is a rise on the less than 3% the previous year.

Among proxy votes, Glass Lewis appears to have made no voting recommendations based on ESG, while ISS has done so on 3.3% of say-on-pay votes. For independent voters the figure is just 2%.

Reasons given for worries about ESG and pay mainly focus on the “opacity” of the metrics used in calculating ESG-based pay components.

‘Tangible’ metrics

Institutional investors, Gomtsian says, prefer “tangible”, “quantifiable” financial metrics.

“By contrast, opaque qualitative targets can be manipulated to increase the level of pay, thus weakening investor oversight,” he writes.

In one explanation, an investor says it was “hard to judge” whether non-financial targets were “stretching or not”.

The main reasons for investor engagement on executive pay include the long-standing issues of structure and volume of pay, links between pay and performance, and disclosure.

Gomtsian also found that many UK investors tend to step away from proxy advice to engage with companies over pay individually.

There are concerns that regulators may need to monitor and act on some issues uncovered by the research. UK shareholders are in decline and foreign shareholders, reliant on proxy advice, are increasing.

This reliance on proxies places greater importance on governance standards.

That could, in turn, mean ESG or non-financial targets should be integrated into local governance codes or proxies could borrow standards from elsewhere.

Lastly, Gomtsian recommends the stewardship code encourages “pre declaration” of voting intentions, so smaller investors can see the thinking of their larger, better resourced, colleagues.

There is an intense focus currently on the AGM season. Seeing how and why investors vote the way they do raises key questions for corporate governance.

  • Facebook
  • Twitter
  • Google+
  • LinkedIn
  • Mail

Related Posts

  • Executive pay rises steeply, despite cost-of-living crisis
    April 11, 2023
    executive pay 2022

    Investors are likely to focus on top pay in this year’s AGM season, as research reveals that executive pay has bounced back.

  • News round-up: this week in governance
    November 26, 2021

    Some reporting requires improvement; Wall Street votes on ESG; CEO pay "remains major concern"; and why the PM should stick to Peppa Pig.

  • UK shareholder pay revolts increase by 56% in 2021
    February 23, 2022
    executive pay

    Last year saw the highest number of notifiable shareholder revolts on pay for five years—and investors seem willing to maintain the pressure.

  • Investors influence ESG performance, study reveals
    July 26, 2022
    Investors influence ESG

    Researchers find that, among the many drivers for improving ESG, intervention by corporate investors is key.

Search


Follow Us

Register Free

Stay in the know! Register to access the latest governance news; plus receive updates about our events and podcasts – Sign up here

 

Most Popular

Featured Resources

wef global risks 2025

The Global Risks Report 2025

The 20th edition of the Global Risks Report reveals an increasingly fractured global...
Supply chain management cover

Strategic Oversight in Supply Chain Management: A Guide for Corporate Boards 2025

Supply chains have become complex, interdependent and opaque and—according to research...
OB-Cyber-Security

Cyber Security: What Boards Need to Know

Maintaining firewalls, protecting servers and filtering malicious emails rarely make...

The IA’S Principles Of Remuneration 2024 2025

This guidance from the Investment Association is aimed at assisting remuneration...
Diligent 2024 leadership tech cover

Leadership, decision-making & the role of technology: Business survey 2024

This research report by Board Agenda and Diligent sheds light on how board directors...

Director Reference Guide: Navigating Conflict in the Boardroom

The 'Director Reference Guide' on navigating conflict in the boardroom provides practical...
Nasdaq 2024 governance report cover

Nasdaq 2024 Global Governance Pulse

This Nasdaq survey gathered data from more than 870 board members, executives, and...

Becoming a non-executive director (4th edition)

Board composition is the subject of much debate, while the role of the non-executive...
art & science brainloop new cover

The Art & Science of Creating an Effective Board

Boards are coming under more scrutiny and pressure than ever before from regulators,...
SAA First time NED guide

First Time Guide for Non-Executive Directors

The role of the non-executive director has never been more vital: to advise, support,...

Register Free

Stay in the know! Register to access the latest governance news; plus receive updates about our events and podcasts. Register


  • Editors & Contributors
  • Editorial Advisory Board
  • Board Advisory & Corporate Services
  • Media Marketing Solutions
  • Contact Us
  • About Us
  • Board Director Network
  • Terms & Conditions
  • Privacy Policy
  • Cookies
|

Copyright © 2025 Questor Media Group Ltd.

  • Terms & Conditions
  • Privacy Policy
  • Sitemap