(Clarifies attribution of ISS data in paragraph 5)
* Several shareholders oppose resolutions at top UK firms
* Kentz becomes first UK firm to have pay plan rejected
* UK, EU politicians encourage shareholder engagement
* New breed of funds focus more on governance issues
By Jemima Kelly and Simon Jessop
LONDON, May 22 Encouraged by politicians,
shareholders are starting to flex their muscles again,
frustrated with the slow pace of reform within companies on
everything from executive pay to appointing more women
After the "shareholder spring" of 2012, when a number of
investors abandoned their traditional back-seat position on the
management of companies, last year's round of annual shareholder
meetings was a much more subdued affair.
But the signs this year point to the return of a more active
stance, with several shareholders rejecting resolutions at
blue-chip firms including Barclays, AstraZeneca
, National Express and Standard Chartered
The proportion of "oppose" votes recommended by investor
advisory firm Institutional Shareholder Services (ISS) against
companies listed in Britain's FTSE All-Share index is up
17 percent for annual general meetings (AGM) up to May 6.
According to ISS Corporate Services, the advisory firm has
issued 27 such recommendations out of a total of 198, versus 50
from 414 for the whole of the previous AGM season.
"Last year was a year of consolidation after the shareholder
spring, but this year you've quite clearly seen a reaction from
shareholders that the corporate world isn't moving fast enough
on these issues," Alan MacDougall, managing director at fellow
shareholder voting advisory firm PIRC, told Reuters.
"Barclays is the tip of the iceberg," he added, referring to
the British bank's AGM on April 24, when more than a third of
shareholders declined to back its pay plan.
PIRC is either calling for a "no" vote, or supporting
shareholder resolutions, against, oil firm Afren
security firm G4S, advertising group WPP and
financial group HSBC among others at upcoming AGMs.
Executive pay has long been a controversial topic, with the
public, politicians and investors growing angry over the rise in
boardroom riches, irrespective of wider economic conditions.
Between 1998 and 2010, average pay for Britain's chief
executives rose 13 percent a year, despite no overall increase
in the FTSE 100 blue-chip share index.
Politicians are encouraging investors to hold companies to
account more and have given them new powers, with shareholder
votes on pay made binding in Britain in October 2013.
While most investors prefer to work behind the scenes with
firms and avoid public disagreements, there are signs they are
prepared to go public when they think change is too slow.
Insurer Standard Life, Barclays' sixth-biggest
investor, took the rare decision of announcing it had voted
against the bank's pay plan, which increased bonuses for
investment bankers last year despite a one-third drop in profit.
For the first time ever for a London-listed company,
shareholders also voted down the remuneration policy of
engineering firm Kentz on Friday.
IT'S NOT JUST PAY
Pay is not the only topic galvanising shareholders.
At its AGM on Tuesday, 10 percent of miner Glencore
Xstrata's shareholders did not back the appointment of
ex-BP CEO Tony Hayward as chairman after criticism of the firm's
failure to appoint any female board members.
A 2011 government review said all of Britain's blue-chip
FTSE 100 companies should aim for at least a quarter of
their boards to be comprised of women by 2015.
While progress has been made, with women now making up 20.4
percent of board seats in FTSE 100 firms, up from 12.5 percent
when the review was conducted, there are still laggards, and the
proportion of board seats occupied by women in the next tier of
250 UK listed firms is just 15.1 percent.
Glencore Xstrata, appearing to feel the pressure, promised
to appoint a woman to its board this year.
A EUROPEAN PUSH
Investors are being encouraged to get more hands-on with
Michel Barnier, the European Union's financial services
chief, has proposed changes to the EU's shareholder rights
directive that would give investors across the 28-country bloc a
"say on pay".
The EU is also planning legislation to make all companies
report non-financial data, such as their environmental record,
which would make it easier for shareholders to hold businesses
to account over a broader range of issues.
For now, however, the centre of shareholder activism seems
likely to remain in the UK because of the relatively high level
of institutional investor ownership in its companies.
"Where there is low insider ownership you are less likely to
have a blocking family or insider stake that is going to have a
significant sway over any voting," said Raj Hindocha, managing
director for research at Deutsche Bank.
"So you are more likely to be able to have an influence and
liaise with a board that is receptive to ideas and change."
Ensuring businesses have good corporate governance appears
to make good business sense for investors.
A January report by fund manager Hermes found well-run firms
on the MSCI World equity index outperformed poorly governed ones
by an average 30 basis points a month from 2008 to 2013.
Such data has encouraged the rise of investment funds that
focus on companies with strong track records in environmental,
social and governance (ESG) matters.
Total global assets under management at ESG funds amounted
to at least $13.6 trillion at the end of 2011, with Europe
accounting for 49 percent, according to the Global Sustainable
Many of these funds see it as in their interests to take a
tougher line on corporate governance.
"We're not here to be warm and fuzzy. We're here to make
money," said Lewis Grant, a portfolio manager who works on the
Hermes global equity ESG fund, which it launched on May 1.
($1 = 0.5935 British Pounds)
($1 = 0.7302 Euros)
(Editing by Alexander Smith and Mark Potter)