Executive Pay Under Growing Shareholder Scrutiny, Equiniti Finds

Executive Pay Under Growing Shareholder Scrutiny, Equiniti Finds

01 November 2018
  • Proportion of companies achieving over 90% votes in favour of proposed remuneration policy drops from 87% (2017) to 83% (2018) 
  • Average votes in favour of remuneration policy drops for both FTSE 100 and FTSE 250 companies 
  • Shareholder voting approval also decreasing for the annual remuneration report 

Equiniti Group plc (“Equiniti”), the UK’s leading share registrar and corporate governance expert, finds that executive pay is increasingly subject to close scrutiny from shareholders, both for proposed remuneration policies and in companies’ annual report with votes in favour on a downward trend. 

While the changes in investor sentiment appear small, the findings are significant given how unusual it has typically been for shareholders to vote against such policies, although discontent has been building over the past couple of years. 

For FTSE 100 companies putting forward a remuneration policy for approval the average number of votes in favour dropped from 94.6% to 93.4%, with the average votes in favour seeing a slightly smaller drop in the FTSE 250 from 94.0% to 93.5%. 

Of all companies that put forward a remuneration policy, the number of companies achieving more than 90% approval from shareholders also saw a year-on-year decrease from 86.6% (2017) to 82.8% (2018), with 7.1% of companies failing to achieve at least 80% of shareholder votes. 

The number of resolutions on remuneration reports that are defeated remain isolated cases, however there is still evidence of growing discontent. The average votes in favour for FTSE 100 companies slipped in 2018 compared to the previous year falling from 92.9 to 91.3% also saw a small dip among FTSE 250 companies. 

The dip was more noticeable in the proportion of all companies failing to achieve more than 90% shareholder approval, which rose from 15.6% (2017) to 17.8% (2018). In terms of voting at AGMs, a vote below 90% for resolutions is unusual and therefore symptomatic of serious investor displeasure with their directors’ pay. 

Chris Stamp, Boardroom Director at Equiniti’s corporate governance unit Prism Cosec, commented: 

“Despite a number of high-profile media cases of excessive executive remuneration, the numbers of defeated resolutions on remuneration policy and remuneration report votes remain relatively low. However, there is an increase in voting against remuneration-related resolutions which suggests that there is a notable swing in investor sentiment towards executive remuneration.” 

“Leading companies are increasingly having to justify their pay to shareholders who are paying close attention to ensure remuneration is aligned with performance and fair when compared to workforce pay. There is a palpable unease among the investor community regarding executive pay, and so company directors would do well to avoid making the issue overly contentious and risk any damaging voting defeats.” 

ENDS 

For more information: 

Temple Bar Advisory 
William Barker / Sam Livingstone 
Tel: 078 2796 0151 / 077 6965 5437 
Email: williamb@templebaradvisory.com / saml@templebaradvisory.com 

Notes to Editor: 

Research 

Equiniti’s 2018 AGM Trends brochure: https://prismcosec.com/media/3818/agm-trends-brochure-2018.pdf 

About Equiniti and Prism Cosec 

Equiniti Group plc is a specialist administrator delivering technology-enabled solutions to some of the world’s best-known brands and UK’s largest public-sector organisations. 

It is the UK’s leading provider of share registration, employee share plans, and associated investor services, and also has market leading positions in pension administration and software, and employee benefit schemes. 

Equiniti’s services, which are delivered by over 5,000 employees, benefit 28 million people in the UK and 120 countries around the world. 

Prism Cosec provides corporate governance and company secretarial services to quoted and unquoted companies to operate UK governance standards – it was acquired by Equiniti Group plc in 2012. 

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