UK corporate governance code

There continued to be a focus on executive pay in 2017 by shareholders of FTSE 350 companies data from Manifest for the Pensions and Lifetime Savings Association’s (PLSA) AGM voting review showed.

The PLSA stated that the executive pay awards continued to be the most controversial aspect of corporate governance, with the figures of significant remuneration-related dissent at FTSE 350 AGMs from 2015-2017 consistent with previous years. The data showed that investors were increasingly holding remuneration chairs to account for remuneration policies as first recommended by the PLSA’s 2017 voting policy.

PLSA AGM voting review
The PLSA’s Luke Hildyard speaking at the Manifest governance seminar last year

In 2016, average dissent levels over remuneration policies were four times higher than dissent over the re-election of remuneration committee chairs as directors. In 2017, they were less than twice as high, suggesting that most shareholders are now voting against the remuneration committee chair if they vote against the remuneration policy.

Overall the AGM voting review showed relatively steady levels of shareholder dissent at company AGMs for the past two years, with roughly one-fifth of companies (FTSE 250: 56 and FTSE 100: 17) experiencing significant dissent over at least one resolution at their AGM. Over the longer term, the report revealed a fall in shareholder dissent since its peak in the aftermath of the financial crisis and the subsequent focus on governance that this entailed.

Luke Hildyard, stewardship and Corporate Governance Policy Lead at the PLSA, said: “Last year we surveyed our members to find out their views on executive pay – over 85% of respondents said they felt pay levels were too high and 87% said they were concerned by pay gaps between executives and the wider workforce

“We subsequently recommended that pension fund investors vote against the re-election of remuneration committee chairs responsible for pay practices when voting against their remuneration policy or report. It’s encouraging to see these recommendations are having a positive effect, particularly alongside the fall in executive pay levels recorded last year, but there is still considerable room for shareholder scrutiny of pay practices to improve. We hope to see these emerging trends continue.”

France: Shareholders show increasing willingness to hold companies to account

Shareholders in France are increasingly willing to table resolutions and to vote against management proposals according to the proxy voting agency, Proxinvest in its AGM review for 2017.

In the year July 1, 2016, to June 30, 2017, Proxinvest’s figures showed that 73 external resolutions were filed at the general meetings of companies in its universe which broke the previous record 62 resolutions filed in 2009. However, Proxinvest noted that 56 of the external resolutions filed last year were at one company, Solocal.

The digital communications company faced investor concerns over its board composition at three general meetings held in October 2016, December 2016 and June 2017.  At the end of May it’s then chief executive, Jean-Pierre Remy, resigned to be replaced by Eric Boustouller and then its chairman Robert de Metz left following the June meetings Pierre Danon, respectively.

Until 2016 Proxinvest said it was the employees who had been the most active in filing external resolutions but shareholders were now more likely to file resolutions and use them as a tool if there was a dispute between investors and a company’s management.

Proxinvest figures also show that opposition to resolutions has risen steadily for over 15 years. For the CAC 40, the percentage of votes against increased by 1.37 points in 2017 to reach 6.51% against 5.14% in the 2016 AGM season. It fell very slightly for small and mid-cap companies to reach 5.43% in 2017 (-0.08 points). However, the trend has been on the rise in recent years, Proxinvest said.

The proxy voting agency said shareholder opposition has been weakened in France by the use of double voting rights for major shareholders in some companies which gives minority shareholders less influence.

UK Church Investors Group toughens up its AGM voting policy

The UK’s Church Investors Group (CIG), which represents church organisations with combined investment assets of approximately £17 billion, has signalled a tougher approach in its AGM voting policy for FTSE 350 companies on a range of governance issues.

The CIG said it had tightened up its approach in three main areas: executive pay, board gender diversity and responding to climate change. In respect of pay, the group said it would withdraw support for remuneration reports where pay ratios are not disclosed, chief executive pensions are excessive, or where financial services or pharmaceutical companies do not pay the living wage.

Where the board of an FTSE 350 company has less than 33% women the CIG said it would vote against all directors on the nomination committee and where less than 25% of board directors are women it would vote against the re-election of nomination committee chairs.

Companies will be measured in their progress in responding to climate change against their scores from the Transition Pathway Initiative,  a project established by the Church of England. If there is insufficient progress in a making transition to a low carbon world the CIG said it would vote against the re-election of the company chair.

Last Updated: 9 February 2018
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