The Pensions and Lifetime Savings Association (PLSA), the membership body for UK’s pension funds, has published its AGM Season Report 2016, focusing on executive pay using data provided by Manifest. A survey of PLSA members for the report found that 87% of respondents believe executive pay is too high.
A majority – two-thirds (63%) – of the 87% believe executive pay is generally too high, while 37% say it’s too high in cases of poor performance. Pension funds also have serious concerns about the pay gap between executives and their workforce with 85% of respondents highlighting it as a problem.
Luke Hildyard, policy lead for stewardship and corporate governance at the PLSA said: “There has been a lot of public debate about executive pay recently and our members have clearly expressed their concern. It’s time companies got the message and started to reduce the size of the pay packages awarded to their top executives.”
There is also concern among some PLSA members about the capacity of asset managers to fulfil their stewardship responsibilities with 35% of respondents stating dissatisfaction. High levels of pay in the asset management industry is also believed by many PLSA members to be preventing asset managers from properly holding companies to account over pay practices, with 60% of respondents stating it as a problem.
The report’s analysis of remuneration-related shareholder votes at company AGMs found that overall levels of dissent did not change dramatically in 2016. However, the number of FTSE 100 companies experiencing dissent levels of 40% or higher increased from two in 2015 to seven in 2016. In the FTSE 350, nine companies that experienced significant shareholder dissent levels of over 20% in 2015, also received dissent of over 15% in 2016.
The report suggests that of the five FTSE 100 companies with the highest level of shareholder dissent: BP (61%), Smith & Nephew (57%), Shire (51%), Babcock (48%), and Anglo-American (48%), none were prepared to acknowledge they had their approach to remuneration wrong in their subsequent statements to the vote.
Despite this, the PLSA also found that there were no significant votes against the re-election of the remuneration committee chairs who had set the most controversial pay packages.
The PLSA said it would be amending its corporate governance and voting guidelines to reflect the findings of the report. The guidelines will include stronger recommendations on the re-election of remuneration committee chairs, in order, the PLSA said, to bridge the gap between stakeholder concerns on executive pay and those responsible for overseeing them.
Meanwhile in the High Pay Centre’s recent inaugural Bob Gavron Memorial Lecture Simon Walker, director general of the Institute of Directors, said that big business should not be surprised by the intervention of government into executive pay when the media and public could see it was increasing faster than their own wages. He drew a distinction between risk taking entrepreneurs and highly paid executives of publicly listed companies who were taking very little personal risk.
Last Updated: 4 December 2016