Some bloody noses are expected around the City of London in coming weeks, as investors large and small display their displeasure with company directors.
Stats show that shareholder rebellions over pay, pensions and various other issues are growing, with several factors thought to be behind the move. In the next few days alone there are likely to be several high-profile disputes.
Hammerson PLC’s (LON:HMSO) annual general meeting takes place at 11am on Tuesday, 30 April in London, with investors gnashing their teeth over the property investor’s executive pay policy. Influential investor advisory group ISS has recommended investors vote against the company’s remuneration report, with chief executive David Atkins and other senior directors in line for incentives numbering millions of pounds.
Not only is the board facing intense pressure to make changes from activist investor Edward Bramson, who owns a 5.5% stake via his Sherborne Investors vehicle, but there has also been objection to the lender’s executive pay policy, with the Investment Association (IA) reportedly raising concerns over a £395,000 pension top-up for chief executive Jes Staley.
Pirc, another corporate governance adviser to pension funds and other institutions, has not entirely supported the company in its battle with Bramson, who is calling for other shareholders to vote him on to the board as part of his campaign to scale back its investment banking arm. In the other corner, ISS and fellow advisory body Glass Lewis have come out in support of Barclays.
Also on Thursday, Daily Mirror and Express newspaper owner Reach PLC (LON:RCH) will face up to its investors with ISS having urged clients to reject the remuneration report. It feels the share awards for CEO Simon Fox and other executives should have been cut back after the decline in the company’s share price last year.
Next week, further interest for corporate fight fans may be found at Standard Chartered PLC (LON:STAN) on Wednesday 8 May, with pay and pensions at the heart of conflict with some investors, while medical products maker Convatec Group PLC’s (LON:CTEC) AGM on Friday 10 May could also need to.
Greater focus on pay and pensions
One reason that companies are getting more bloody noses is that major investors are whipping their gloves off.
Indeed, a noticeable shift took place last year where asset managers began to take environmental, social and governance issues more seriously, Sacha Sadan, Legal & General Investment Management's corporate governance chief, told The Times. Sadan's LGIM last year opposed proposals put forward by almost 400 UK companies last year, up more than 50% year on year, while opposing the election of more than 100 chairman over gender diversity grounds, up from 37 the year before.
Another influential figure in the City, Aviva Investors' global head of governance, Mirza Baig, recently said he expected boardroom pensions to be “a hot button topic in the AGM season” and expected Standard Chartered to come under intense scrutiny.
Micro Focus International PLC (LON:MCRO) remuneration report defeated with a 50.4% vote against its remuneration report, while fellow FTSE 100 group Segro PLC (LON:SGRO) saw a near-50-% vote against executive pay this month.
The increased focus on pensions is in part down to a call by the IA, which represents institutional investors that manage around £7.7trn of assets, for new company executives to receive pension contributions at the same level as most of their staff.
In its pre-AGM season call to arms, the IA said that existing executives should have their pension payments cut to the same level over time. The group also said it has general concerns about any company making contributions of 25% of salary or more.
This is not a new concern, as the IA’s research last summer revealed a rising trend for investor rebellions. Opposition to individual director re-elections more than doubled from the same time last year, to 80 companies, while 120 more PLCs were added to the IA’s register of companies that had faced a shareholder rebellion. Of the FTSE 100, last year there were 18 companies that were given a bloody nose over director pay, double the number from the previous year, while on the FTSE 250 the number dropped slightly to 61 from 68.
“Shareholders have been clear about their expectations for this AGM season and have shown that they are not afraid of casting their votes accordingly,” an IA spokesperson said this week. "This is part of their role in holding big business to account on behalf of the millions of people whose money they manage.”
-- Adds comment from Legal & General and the IA. --