While the AGM season is now mostly behind us as far as the biggest European blue chips are concerned, it’s now the turn of the mid-caps to face their shareholders. A quick review of the data so far shows that overall turnout, based on 74 of the top 100 UK meetings is holding steady at 68% (2009: 67%). What is news, though, is that concern about remuneration has so far not made it to the ballot box, contrary not only to many investor expectations, but also some of hte more dramatic press headlines.
The most notable upsets this year at Xstrata, Cobham, Cairn Energy and Inmarsat should certainly give those boards pause for reflection, but, on average, dissent at the ballot box has fallen dramatically. Across all meetings and all resolutions dissent (Against + Abstain) is running at 2.5% with remuneration report dissent standing at 8% – roughly half the 2009 level.
Several factors will be at play here. Firstly we are dealing with the largest companies with the most diversified shareholder base. It’s progressively more challenging for concerned shareholders to make the same kind of progress than they can with their more concentrated ownership stakes further down the index. Secondly, with the post-crisis political focus off the banks, some shareholders may feel that it’s time to give companies a breathing space to respond.
Manifest’s analysis of voting data is beginning to show something of a yo-yo effect with dissent moving up and down on an almost annual basis. Could this be because companies are becoming blasé about “shareholder rebellions” and shareholders respond with more aggressive votes the next time? Quite possibly. The challenge for the dedicated governance teams is that their efforts at positive dialogue and engagement can be overshadowed by the bulk box-ticking of other investors more keen to seek a compliance standard of voting than integrating governance into their investing DNA.
Analysis of the remuneration issues themselves does tend to lead credence to issuers turning a deaf ear to shareholder concerns about pay. In notable cases pay policy seems to have gone backwards with too much discretion being allocated to remuneration committees, overpayment of bonuses (in relation to financial performance) and less than transparent disclosures about relevant metrics.
When it comes to the future direction of governance, the appointment of Dr Vince Cable, the Lib-Dem’s pre-election treasury spokesman to the Department of Business will be interesting to watch. While the Conservative manifesto was largely silent on corporate governance and sustainable investment, the same cannot be said of the Lib-Dems. It’s too early to say whether Cable will pick up where Myners left off, but given the increased European and US focus on governance we’re going to suggest that it will be business as usual on the governance front and the focus on stewardship and accountability will continue to be a priority for the British government.