The business secretary said the government’s pressure had given shareholders a new confidence: ‘There’s a process going on, a very healthy one, where investors are taking control of the companies they own.’
Business secretary Vince Cable has urged shareholders to keep up the pressure on boardroom pay as he pledged to press ahead with his plans to hand investors new powers to clamp down on excessive bonus deals.
After a fortnight of big protests by City investors about pay at underperforming companies, Cable welcomed the “very healthy” signs that shareholders are finally taking control of the companies they own.
Cable said: “There is a broader movement. It’s about reacting to extremes. We’ve seen ludicrous levels of payments unrelated to performance.”
Some 60% of shareholders failed to back executive payouts at insurance company Aviva on Thursday – putting intense pressure on chief executive Andrew Moss.
The insurer was among five companies to face protest votes on that day alone. On Friday three more companies – engineering company IMI, Avocet Mining and promotional products company 4imprint – faced rebellions. At FTSE 100 company IMI more than 30% of investors failed to support a new boardroom incentive plan. Almost 20% of investors failed to back Avocet Mining while almost 25% failed to back 4imprint‘s pay policies.
“Investors need to keep it up,” said Cable. “It needs to be sustained.”
Cable is currently considering whether to give shareholders more power by making the annual vote on remuneration binding on companies. It is currently only an advisory vote which companies can simply ignore. He is also considering ways to simplify the way executive pay is disclosed.
The business secretary believes the government’s pressure has given shareholders new confidence: “There’s a process going on, a very healthy one, where investors are taking control of the companies they own. It’s a very positive trend. We’ve reinforced it, giving them the confidence [to vote].”
Without pre-empting the outcome of the consultation, he said, “it is certainly our intention to have a binding vote”. The consultation also floated the idea of having a “super majority” threshold for votes on remuneration reports – which currently have a 50% pass rate – although he conceded that the consultation was looking at issues about whether a majority investor might be able to have disproportionate influence.
Pay policies at international companies such as Citigroup in the US and UBS in Switzerland have also faced opposition. A revolt at Citigroup last month – where investors voted down the £9m pay packet of chief executive Vikram Pandit – kicked off a wave of unexpectedly large rebellions. At Barclays one in three investors failed to back the bank’s pay policies. The Aviva vote this week was only the fourth time a FTSE 100 company has had its pay polices voted down in the 10 years since the remuneration vote was introduced.
The revolts are taking place in the midst of the annual general meeting season and further tensions could emerge in the coming days at companies as diverse as bookmaker William Hill, commodities trader Glencore and the materials science group Cookson.
Investor body Pirc is advising its clients, pension funds and local authorities to vote against the Cookson report in protest over the company’s performance and decision to hand out bonuses. The payouts include an estimated £7m to chief executive Nick Salmon from a long-term incentive plan after a five-year period in which the company has lost 86% of its value.
Cookson disputed Pirc’s analysis and said it does not reflect the achievements of the current management team.