A handful of companies who have bucked the trend in 2013 for ‘quiet diplomacy’ by failing to respond effectively to shareholder concerns about remuneration are named in a report by the National Association of Pension Funds (NAPF) today (Monday).
Analysis of the 2013 AGM season by the NAPF has shown that while most companies who faced significant rebellions by their shareholders in the ‘shareholder spring’ of 2012 have listened and learned, there are a few who have not. Afren, Immarsat and Babcock are among the 10 FTSE companies highlighted which, having received a warning from shareholders last year, received more than 15 per cent dissent (votes against and abstentions) on their remuneration report in 2013. Afren was the only company so far this year to have its remuneration report voted down by its shareholders – with nearly three quarters voting against.
However, most companies have acted to avoid the reputational damage inflicted by 2012’s high profile shareholder rebellions by engaging more and earlier with shareholders. They also appear to be cautious about introducing change ahead of the remuneration disclosure regulations and the binding vote on remuneration policy which come into effect this October.
Joanne Segars, Chief Executive, NAPF, said:
“The good news is that most companies are making efforts to improve the disclosure of their remuneration practices and to ensure their policies are driving appropriate performance. We are also pleased to see that many companies are responding positively to the increasing expectations of investors for Audit Committees to safeguard the independence of the external auditor.
“We hope that highlighting the few companies where shareholders have felt compelled to give the company another reprimand will cause them to reflect, listen to shareholder concerns and introduce changes next year. We will continue to keep an eye on them and encourage all companies to assess whether their current remuneration practices align rewards to long-term success and returns to shareholders.”
There are encouraging signs that investors are directing their attention towards other important issues, too, such as the audit. It is clear that companies are responding to investors, and the related attention on the issue arising from the UK Competition Commission inquiry and European Commission proposals, by ending some of the long-auditor tenures which in some cases stretch to many decades. The NAPF encourages other firms where the external auditor has been in place for a lengthy period to follow suit.
In March this year, the NAPF wrote to the FTSE 350 chairmen to warn that companies which had failed to create a strong link between executive rewards and performance should expect shareholders in 2013 to repeat their concerns of spring 2012. It also published new Remuneration Principles (developed with Hermes EOS, RPMI Railpen and USS), which it hopes to see applied from 2014. The final version of the Remuneration Principles will soon be published.
The NAPF AGM Season Report is the first in what will be an annual monitoring exercise. It will be in addition to the Corporate Governance Policy & Voting Guidelines the NAPF publishes each November.
Notes to editors:
1. The NAPF is the leading voice of workplace pensions in the UK. We speak for 1,300 pension schemes with some 16 million members and assets of around £900 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.
2. Please see NAPF’s 2013 AGM Season Report to get the full story.
3. The Remuneration Principles published by NAPF (with Hermes EOS, RPMI Railpen and USS) in February 2013 sets out four principles to encourage companies to change their reward structures as they begin to think ahead to the introduction of the binding vote on remuneration policy next year. The four principles are:
- management should make a material long-term investment in the shares of the business they manage,
- pay should be aligned to long-term success and the desired corporate culture throughout the organisation,
- pay schemes should be simple, understandable for both investors and executives, and ensure that rewards reflect long-term returns to shareholders, and
- remuneration committees should fully explain and justify how their decisions operate to deliver long-term business success.
Dee Sullivan, Head of Media and PR (interim), 020 7601 1717 or 07917 506 683, [email protected]
Aimee Savage Richards, Press Officer (interim), 020 7601 1718 or 07825 171 446, [email protected]