Ethical Performance
inside intelligence for responsible business


UK investors mobilize votes on executive pay

June 2003

Excessive director pay has dominated the UK’s spring annual general meeting season, with several companies reporting up to 30 per cent of shareholders voting against pay schemes for senior executives and an unprecedented 51 per cent of shareholders opposing a remuneration package at GlaxoSmithKline.

Pensions Investment Research Consultants says the extent of concern on executive pay has been significant. ‘We don’t have all the figures, but we’re finding that about a third, at maximum, are voting against remuneration packages, with the average level about 20 per cent,’ said research director Stuart Bell. ‘Executive pay has been the main thing this season, and it has overshadowed everything else’.

The shareholder vote at GSK related to a £22m ($34.9m) severance pay package for chief executive Jean-Pierre Garnier, although the vote is not binding.

Among other companies to have faced significant challenges on executive pay are Shell, where around a quarter of shareholders voted against the company’s remuneration policy with the support of the National Association of Pension Funds, Cadbury Schweppes, where a third failed to back its remuneration report, and Prudential, where 17.5 per cent of shareholders did likewise.

At the AGM of the banking group HBOS, 21 per cent of shareholders voted against its remuneration policy, while 38 per cent failed to back management group Amvescap’s package.

By the middle of May, the NAPF had recommended that shareholders either vote against or abstain on remuneration schemes at 47 company meetings, including those at Dimension Data, Provident Financial, Schroders and Wolverhampton & Dudley Breweries.

Bell said there were signs that this shareholder action was having an effect. ‘Some pay schemes have been modified in the face of shareholder opposition, and there have also been promises made to institute change in the future,’ he said.

Among those to have conceded the need for change are Cadbury Schweppes, whose remuneration committee chairman Rick Braddock has agreed to meet investors to review pay policy. Braddock said that ‘given the climate here, both inside the company and externally, we are going to look at a whole range of things now.’

The NAPF says both individual and institutional investors are voting against the executive remuneration policies of companies, with the institutions particularly active.

It cites the examples of GSK, clothing retailer Next, where 20 per cent of votes opposed the remuneration package, Reuters (22 per cent) and Reckitt Benckiser (27 per cent).

Rebellious shareholders have been backed by the UK government, with trade and industry secretary Patricia Hewitt saying protests over directors’ pay are ‘entirely justified fury’. She hinted the government could go further than the limited measures so far introduced to increase transparency on pay.

The main AGM season is now over, although there are further UK meetings this month.


3BL Media News
Sign up for Free e-news
Report Alerts
Job Vacancies
Events Updates
Best Practice Newsletter