PLSA AGM voting review finds welcome progress, but there’s still work to do.
As we head into Annual General Meeting (AGM) Season, The Pensions and Lifetime Savings Association (PLSA) has today published its AGM Voting Review (view here) examining the results and causes of shareholder dissent for FTSE 350 companies during 2017.
Shareholder votes at AGMs are of particular interest to UK pension funds – responsible for investing £2.2 trillion on behalf of over 20 million savers in the UK – because they provide a useful indication of the strategy, governance and culture of these companies. Prime Minister Theresa May’s recent article in the Observer newspaper which proposed action against excessive executive pay awards demonstrates the growing emphasis on the area of corporate governance.
Overall the AGM Voting Review shows 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 reveals a fall in shareholder dissent since its peak in the aftermath of the financial crisis and the subsequent focus on governance that this entailed.
Table A: Significant dissent at FTSE 350 AGMs since 2008
Executive pay awards continue 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.
Table B: Significant remuneration-related dissent at FTSE 350 AGMs since 2008
The report also illustrates some progress in holding board members to account for flawed executive pay practices at FTSE-100 companies. 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.
Luke Hildyard, Stewardship and Corporate Governance Policy Lead at the PLSA, commented:
“Last year we surveyed our members to find out their views on executive pay – over 85 per cent of respondents said they felt pay levels were too high and 87 per cent 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.
“We remain concerned that too many companies are failing to communicate the link between their employment models and their wider strategy and purpose, as highlighted in our recent analysis of what FTSE 100 companies’ annual reports tell shareholders about their workers. Such information is important to pension funds as investors who are looking for information on the success of the companies they invest in.”
ADDITIONAL TABLE FROM AGM REPORT:
Table C: Average dissent on FTSE 100 remuneration votes
** = Binding votes on Remuneration Policy only introduced at the end of 2013
METHODOLOGY INCLUDING SOURCING
The PLSA examined AGM results for FTSE 350 companies in 2017. We have taken dissent levels of over 20% to be ‘significant’. All data was provided by Manifest, the proxy voting agency. In addition:
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