· 87% of pension funds say executive pay is too high
· 60% of pension funds agree that high levels of asset management pay is preventing them from properly holding companies to account over pay practices
The Pensions and Lifetime Savings Association (PLSA) has today (Thursday) published its AGM Season Report 2016, focussing on the issue of executive pay. The report reveals that 87% of pension funds responding to a PLSA member survey say executive pay is too high.
Of that 87%, almost two-thirds (63%) 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.
The PLSA member survey also highlights concerns from pension funds over the capacity of asset managers to fulfil their stewardship responsibilities with 35% of respondents stating dissatisfaction. There is also a strong sense that high levels of pay in the asset management industry is preventing asset managers from properly holding companies to account over pay practices, 60% 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 also argues 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.
Luke Hildyard, Policy Lead for Stewardship and Corporate Governance, Pensions and Lifetime Savings Association: “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.
“Pension funds make up some of the most long-term and engaged shareholders in UK companies and are understandably worried by the long-term consequences of the pay gap between those at the top and the wider workforce. We will shortly be publishing guidelines encouraging our members, and their asset managers, to take a tougher line on the re-election of company directors responsible for executive pay practices.”
The PLSA will update its Corporate Governance Policy and Voting Guidelines to reflect the findings in the report. The guidelines will include stronger recommendations on the re-election of remuneration committee chairs, in order to bridge the gap between stakeholder concerns on executive pay and those responsible for overseeing them.
The AGM Season Report comes after the PLSA wrote a letter, supported by the Pensions Minister, Richard Harrington MP, to the Chair of every FTSE350 company asking them to share fuller information with investors about the culture and working practices of their workforce.
The PLSA also published its toolkit, ‘Understanding the worth of the workforce’, in July outlining the type of information about workforce-related issues that pension fund investors should request from the companies in which they invest, and how this information could be most helpfully presented to investors.
For this research, the PLSA examined AGM results for FTSE 350 companies between 1 September 2015 and 31 August 2016. This is the period we have taken for ‘2016’ with corresponding dates, for 2015, 2014 and so on. We have classified companies as being in the FTSE 100 or FTSE 250 if they were classified as part of the index on the date of their AGM during this period.
All data was provided by Manifest, the proxy voting agency. The PLSA is very grateful for their support of this report.
NOTES TO EDITORS
We’re the Pensions and Lifetime Savings Association; the national association with a ninety year history of helping pension professionals run better pension schemes. Our members include over 1,300 pension schemes with 20 million members and £1 trillion in assets, and over 400 businesses. They make us the voice for pensions and lifetime savings in Westminster, Whitehall and Brussels.
Our purpose is simple: to help everyone to achieve a better income in retirement. We work to get more money into retirement savings, to get more value out of those savings and to build the confidence and understanding of savers.
Lucy Grubb, Head of Media and PR, Pensions and Lifetime Savings Association
T: 020 7601 1726, M: 07713 073 023, E: [email protected]
Babak Mayamey, Press Officer, Pensions and Lifetime Savings Association
T: 020 7601 1718, M: 07825 171 446, E: [email protected]
Kathryn Mortimer, Press Officer, Pensions and Lifetime Savings Association
T: 020 7601 1748, M: 07901 007 713, E: [email protected]