Growing opposition to FTSE 100 pay

Shareholder rebellions at listed companies rose by over a quarter in 2018, with pay proposals attracting particular scrutiny, according to analysis of voting trends during the 2018 AGM season by the Investment Association

The trade body representing the UK’s asset management industry says 120 FTSE all-share companies were added to its public register, which tracks significant shareholder dissent (over 20%), up to the end of July 2018, compared to 110 companies over the same period in 2017.

While executive pay declined overall as an issue in the FTSE all-share, with the total number of remuneration resolutions dropping from 68 in 2017 to 61 in 2018, there was a sharp rise in objections to FTSE 100 pay this year.

This year 18 pay resolutions attracted over 20% shareholder dissent among FTSE 100 companies, double the number (nine) in 2017. This resulted in the near doubling of FTSE 100 companies on the public register because of pay, up from eight in 2017 to 15 in 2018 (88%).

In total, 237 individual resolutions were added to the public register in 2018, a jump of 25% from 2017. Significantly, in 2018, 29 repeat offenders were for the exact same resolution as last year (35 resolutions in total).

Opposition to individual director re-election was also a key theme, with the number of total resolutions more than doubling from 38 in 2017 to 80 in 2018. The rise was particularly stark in the FTSE 250, where rebellions more than doubled (106%) with 37 resolutions in 2018 compared to just 18 in 2017.

Among the 46 companies added to the public register in 2018 for director re-election, nearly half (43%) saw their chair face a rebellion of greater than 20%, pointing to a growing disquiet over individual accountability for the decisions made.

Chris Cummings, chief executive of the Investment Association, said: ‘Shareholders have shown their teeth this year over FTSE 250 director re-election.

‘They are using their votes to hold individual directors to account for decisions they made on issues such as executive pay and board diversity, as well as concerns that individual directors do not have the bandwidth to fulfill their roles as they spread themselves too thinly on too many boards.

‘While executive pay declined overall as an issue, there was a deeply disappointing jump in the number of FTSE 100 companies that saw pay rebellions in 2018.

‘Shareholders clearly remain unimpressed with the approach to pay last year and are frustrated the message is not getting through to some boardrooms. FTSE 100 companies must do more to ensure the pay packets of their top team align with company performance and remain at levels that shareholders find acceptable.’

Investment Association public register is here

Report by Pat Sweet

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