Plus500 pay revolt

The biggest revolt against a remuneration of the AGM season so far came this week, when shareholders turned on pay deals at Plus500, the fintech group.

Shareholders voted 65.86% against the pay report, which City AM says covers the pay, $3.7m each, of its two bosses David Zruia and Elad-Even Chen.

Plus500 is, in fact, a London-listed Israeli company that has developed a stock trading platform.

The vote is “advisory of course” but Plus500 put out a statement saying it would consult with shareholders.

The board said it “takes the outcome of shareholder votes extremely seriously and will engage with shareholders and shareholder advisory bodies to ensure their feedback continues to inform the Company’s approach to governance and remuneration taking into account the specific needs and profile of the Company.”

Last month, AstraZeneca shareholders voted 23.98% against the remuneration report, so Plus500 surpassed that by some way. Well done.

Audit rap

It’s been week of sanctions for auditors again, this time with fines totalling more than £14m for PwC, EY and Oliver Clive.

This was all in relation to audits of London Capital & Finance (LCF) plc that issued bonds to private clients and then lent out the proceeds. LCF went into administration in 2019, owing £237m to more than 11,000 individual bondholders.

The Financial Reporting Council investigated the 2015 audit and accounts. Oliver Clive are fined £60,000 (discounted 30% to £42,000) and reprimanded over an audit that “did not meet relevant requirements”.

PwC are fined £7m (discounted by 30%) over a 2016 audit. Partner Jessica Miller is fined £150,000 (discounted 30%).

EY got themselves in hot water over the 2017 audit and was fined £7m again, though discounted this time by a total of 40%. Partner Neil Parker is fined £75,000, with 40% off.

Jamie Symington, deputy executive counsel at the FRC, says in each audit the auditors failed to identify and assess the risk of material misstatements.

“These breaches are made considerably more serious by the fact that all of the auditors knew they were auditing an expanding business which was engaged in selling unregulated financial products to retail investors, and that potential investors might place reliance on the clean audit opinions.”

Carillion Joke

The long sorry sage of KPMG’s audit of Carillion continues this week with publication of the regulator’s full account of its investigation. KPMG, as you may remember, earned itself a record fine last year of £26.5m (discounted to £18.5m) for failings on the Carilion audit of 2018.

The Times was quick to point out this week the haggling that seems to have been going on inside KPMG over aspects of the audit. The Financial Reporting Council’s documents reveal an email from one KPMG staffer in 2017 on the valuation of car park: “I suspect this paper will be more Mills & Boon than Shakespeare but hopefully it will get us there.”

Does this illustrate the full story of KPMG’s audit of Carillion? No, it does not. Not by a long stretch. The report runs to 450 pages. But it does indicate how auditors were straining to make things work. And one individuals strong sense of satire.

Loud investors here to stay

The recent proxy spat between Disney and big investors shows that the step up in engagement from big institutional investors is a permanent shift, according to investor relations expert Jean Benoit Roquette.

Writing for IR magazine, Roquette, former head of investor relations at Ubisoft, the French software company, warns that investor relations professionals are under the cosh.

“Leaders are now repeatedly challenged, boards of directors are suddenly targeted and under pressure, and general meetings have transformed into reputational battles,” he says.

However, he reminds boards there is an upside to all the hard work put into investor relations. “It is a demanding task that requires heavy work and commitment from many teams: IR, finance, legal, compensation, ESG and the lead independent director.

“But the return on investment is real: the process tells shareholders that the company is respectful of their rights and open to their recommendations. They will remember this during hard times.”

Telling consequences

A quick note of pessimism about the drive for increased corporate disclosures on ESG factors. Bryce Tingle, a legal boffin at the University of Calgary, reckons what he dubs “therapeutic disclosure” will fail to improve ESG performance.

Many experts, he argues, question whether disclosure works to change behaviour and corporate policy decisions, while increased reporting can have unintended consequences. Pay disclosures have enabled execs to talk up their pay, for example. Companies, he says, may stay away from public markets, where disclosures are required, rather than reveal all.

And if companies are in the public markets, they engage in “greenwash”, “woke wash” or “spin”. The title of Tingle’s paper asks if disclosures are a “kind of madness”. On that note, Board Agenda is off in search of good news.