Halfway through the FTSE 350 AGMs, companies are sustaining three times as many significant votes against executive pay than last year.

Figures from shareholder advisers Georgeson show that 9% of the FTSE 350 annual general meetings so far have seen votes against remuneration reports of 20% or more. At this time last year, the figures was 2.6%.

Georgeson notes that many companies are proposing bigger pay packages this year.

Daniel Veazey, Georgeson’s corporate governance manager, says: “Last year, FTSE 350 companies were more conservative in recommending higher levels of pay, which led to high shareholder support and low levels of opposition.

“This year, UK companies seem to be challenging the status quo a little more, and we are seeing proposals with larger remuneration packages.”

Space for reflection

In April, 65.6% of shareholders voted against the remuneration report at the aerospace firm Melrose Industries. A statement from the organisation, whose turnover is £3.5bn, said the vote would “inform the company’s future approach to remuneration”.

In another example, 51.6% of shareholders in XP Power, a manufacturer of electrical components, voted against the pay report. The company said it would “engage” with shareholders to “fully understand their concerns”.

Veazey says the expanded pay deals may be in part due to changed Investment Association (IA) guidelines, issued in October last year.

The guidelines were viewed by many as relaxing corporate restraint on pay, following a period in which both the Covid pandemic and the global cost of living crisis had caused companies to be more cautious with executive rewards.

At the time the guidelines were released, IA director Andrew Ninian said they “stress” each company should adopt a pay approach that “makes sense for its business and the market it operates in”.

‘Clear rationale’

The guidelines told remunerations committees that pay packages should come with a “clear rationale” for how they “align” a company’s “purpose, values and strategic goals, and how they help attract, retain and motivate talent.”

While the IA’s guidelines may be one cause, the shift in advice came amid a major campaign by senior City figures to talk up pay levels.

London Stock Exchange chief Julia Hoggett chaired a campaign group, the Capital Markets Industry Taskforce (CMIT), that lobbied for listed companies to make higher pay awards.

In her original blog from 2023, Hoggett argued higher pay was necessary for the UK to remain competitive. “We are at a pivotal moment,” Hoggett wrote. “We should be encouraging and supporting UK companies to compete for talent on a global basis, so we remain an attractive place for companies to base themselves, stay and grow.

“The alternative is we continue standing idly as our biggest exports become skills, talent, tax revenue and the companies that generate it.”

Shareholders warned that they would be watching remuneration reports at the beginning of the AGM season. In February, a poll of fund managers showed that executive pay would be the top engagement issue for investors around the world.

Against a background of economic uncertainty and low growth, the report said: “Companies will likely need to adopt a more nuanced approach to remuneration design and disclosure.”

A flag was raised too by Deloitte, with research that also highlighted widespread changes to pay policies.

The AGM season has yet to finish. Investors clearly have greater concerns about executive pay—despite arguments from senior figures—and are making their views felt. While the pay reports may have been prompted by new guidelines, investors remain unhappy with some companies, meaning more pay revolts could be in the works.