Global Investing

Eyes off the prize?

It’s starting to look like investors in Britain’s top companies have reverted to type.

Reuters ran the numbers on voting at FTSE 100 annual general meetings (AGM) last week and you would be forgiven for thinking the ‘shareholder spring’ had never happened. The average vote against executive pay deals at the 71 top companies which have so far held their AGM was down 18 percent from the result for the full FTSE 100 in 2011. The raw number has to be viewed with caution; investors claim victory in forcing companies to engage, cut absolute pay and tweak bonus arrangements, even though there is little direct evidence so far of pay moderation in absolute terms.

The protest vote fell or stayed put at 58 percent of companies and there was little other evidence of acrimony when you look beyond pay votes. If we exclude a clutch of votes over the rather arcane issue of notice periods for general meetings, then more than two thirds of companies suffered no protest vote of 10 percent or more on any other AGM resolution.

Of course, there have been exceptions. Easyjet stands out as the focus of investor ire, drawing more than double the protest vote of the next company and after suffering similar last year. But the revolt here has been very much driven by the objections of founder and now largest shareholder Stelios Haji-Ioannou. Glencore too, the second most robust protest, had its own very particular narrative driving the voting this year.

There are others who have seen the protest steadily increase over the last two years. Anglo American saw the vote against its remuneration report rise from 3.25 percent in 2010, to 5.3 in 2011, 13.2 in 2012 and finally to 21 percent this year. That kind of pressure, steadily ratcheting up as more investors join in, may well signal a time for some changes in the way the mining group pays its bosses.

The other WPP protest

So, the CEO of the world’s biggest advertising firm failed to pitch his own pay deal to WPP’s investors.

Wednesday’s vote against the remuneration report which grants Martin Sorrell a 6.8 million pound pay award means shareholders can claim another victory in their (non-binding) efforts to wean executives off pay deals they consider excessive.

Sorrell has resigned himself to some horse-trading between the Board and shareholders in the wake of a vote which was notable for his robust defence of his worth. But of course, it isn’t Sorrell that’s the problem; it’s the possibility of his absence that really worries investors.

UPDATE: Well sprung?

(This May 25 post has been updated to reflect AGMs which took place on Friday and to include graphics)

We’ve just witnessed a stirring spectacle of shareholder empowerment during the British AGM season. Haven’t we?

Well…. I’ve pulled together some numbers on remuneration resolutions from the 63 FTSE100 AGMs we’ve seen so far this year which shows that the average protest vote against pay did indeed go up from 2011 to 2012….

Pay vote wrinkles

We don’t know the full story around Andrew Moss’ departure from Aviva on the back of a hefty protest vote from investors over his pay deal. It may well be that major shareholders made it very clear behind closed doors that they expected to see him go, with the vote acting as a public demonstration that they were serious about private demands. Perhaps the board found the advisory vote to be useful lever to remove an underperformer who had brought some troublesome baggage to the role.

But whatever the truth of the matter, the story exposes a wrinkle in the debate over executive pay.

Investors have been cast in the role of white knights as politicians and boardrooms joust over remuneration. There is a hope that this disparate posse will save us all from sky-high pay deals and the burgeoning gap between corporate leaders and their workers. But the Moss case raises questions over how effective they can be.