(Repteats without changes)
* Average vote against pay deals falls to 6.6 percent from
7.6 percent in 2012
* Average 'No' vote on pay down 18 percent since 2011
* Business secretary Cable warns reforms will fail unless
investors use new powers
* Investors say company boards have been rewarded for
* For a FACTBOX on the FTSE 100 pay votes data, click here
By Joel Dimmock
LONDON, June 20 Investors in Britain's largest
companies have rowed back on the protests over pay which most
readily symbolised public distaste over perceived corporate
greed during last year's 'shareholder spring'.
Research by Reuters has found that the average vote against
executive pay deals at FTSE 100 annual general meetings has
fallen by 18 percent from two years ago, even though surveys
suggest earnings have continued to rise.
The decline in dissent comes shortly before shareholders
acquire new powers to reject compensation policies.
With more than 70 percent of 2013 FTSE 100 AGMs completed,
remuneration resolutions have drawn an average 'No' vote of 6.6
percent, down from 7.6 percent for the same companies in 2012
and from 8 percent for all FTSE 100 members in 2011.
As with other stock indexes, the British blue-chip
benchmark's composition changes slightly from year to year.
These votes are still advisory, but from October reforms
brought in by Britain's business secretary Vince Cable will give
shareholders the power to reject any changes to a pay policy at
the next company AGM, or to vote down an unchanged policy every
No FTSE 100 pay vote in 2013 has so far seen objections
reach the 50 percent threshold which would force a company back
to the drawing board. Last year, a majority of shareholders at
two companies, WPP and Aviva, voted against
proposed pay deals for executives.
There is no clear evidence that the decline in voting levels
reflects a fall in executive earnings, although some major
investors credit efforts by companies to make changes and better
engage with shareholders for the fall in protest votes.
A survey last week by consultancy MM&K and proxy voting firm
Manifest found that average pay for UK CEOs in 2012 had
increased by more than 10 percent from 2011 as an equity rally
inspired by quantitative easing inflated earnings. Click here
for more details: r.reuters.com/duj98t
Cable told Reuters there had been some evidence of pay
moderation, particularly among new appointments. Barclays
CEO Antony Jenkins got a package worth 2.6 million
pounds last year, for example - much less than the 17 million
pounds his predecessor Bob Diamond took home in 2011.
But Cable warned that shareholders risk squandering their
new powers if they lack the determination to challenge pay deals
they perceive to be too generous or contrary to a firm's
"Our changes will help to create the right environment for
long-term, responsible private sector growth, which will in turn
support a stronger economy and a fairer society," said Cable, a
Liberal Democrat member of the Conservative-led coalition
"The challenge is now for shareholders to engage with
companies. We've given them the tools through our reforms but
these will only work if shareholders are willing to use them."
When British companies faced their shareholders during the
2012 AGM season, it felt like revolution was in the air. Heads
rolled and the phrase 'shareholder spring' was coined to echo
the popular uprisings across the Arab world.
The average vote against pay deals actually fell compared
with 2011, however, and the latest data shows a further decline
so far this year.
"This does not bode well for the incoming regime of binding
shareholder votes," said Alan Macdougall, managing director at
PIRC, which provides voting advice to UK institutional investors
and is a vocal campaigner for improved corporate governance
"The willingness of many asset managers to nod through all
but the most egregious remuneration policies means it would not
be surprising to go through a whole season without a company
"There is a real danger that unengaged asset managers
undermine the credibility of shareholder oversight of pay," he
And it's not the case that shareholders have simply toned
down their protests through the use of abstentions.
When abstentions are rolled into the total votes counted at
FTSE 100 AGMs, the Reuters research shows that 2.2 percent of
votes have been withheld so far this year on pay resolutions, a
fall from 2.4 percent in 2012 and from 3.6 percent in 2011.
LEARNING THE LESSONS?
Angeli Benham is UK corporate governance manager at Legal &
General Investment Management, the fund arm of the British
insurer, which owns about 4 percent of UK shares. She said the
decline was a function of last year's ructions.
Although the average vote against pay dropped in 2012,
investors could be said to have picked their battles.
Shareholder votes claimed the scalp of Aviva CEO Andrew Moss,
forced WPP back to the drawing board on bonuses, and sent other
companies scrambling to tweak pay arrangements as their turn on
the AGM treadmill approached.
"A lot of the companies that I worked against last year, did
come and chat to shareholders and most of them have made
significant changes to their remuneration," said Benham.
"Other shareholders are now engaging more with companies...
and companies that haven't engaged with us in the past are
Investors suggest that some companies last year were playing
catch-up with pay after restraint during the financial crisis,
and were willing to stomach political anger and investor tutting
in order to bring salaries to levels they deemed appropriate.
Historically, many investors have been loath to join a
public vote against management and there were already
expectations that this latest AGM season might fail to live up
to last year's headlines.
Fund managers often claim to do their best work behind
closed doors and highlight the need for pragmatism when voting
on compensation for UK CEOs which is not out of step with
payouts to peers around the world.
"It suits the status quo in both PLC remuneration committees
and the investment management industry to pretend that the
drop-off in shareholder opposition to pay is a sign of
progress," said PIRC's Macdougall.
"Neither group really believes that there is a problem with
pay, and so the token changes companies are willing to make are
quickly banked as 'wins' by asset managers."
(Editing by Catherine Evans)