Influential shareholders to take tougher action on excessive executives’ bonuses

Shareholders’ refusal to back big pay proposals part of a wider trend

Several of the world’s most influential shareholders are planning to take tougher action on excessive bonuses for company bosses in 2017 after investor protests over executive pay have grown to levels not seen before.

Large investors including Fidelity International, Aberdeen Asset Management, Calpers, Standard Life and Henderson Global Investors are planning to increase pressure on boards to reduce excessive pay and introduce greater transparency in 2017.

Other big investors that have promised to stamp down on payouts include UK asset manager Hermes Investment, USS Investment Management, the £50 bn ($62 bn) pension scheme, and the Church of England’s investment arm.

This is part of a wider trend. According to figures compiled for the FT by research group Manifest, between 10 percent and 20 percent of shareholders refused to support pay proposals at 62 S&P 500 companies and at 18 FTSE 100 companies last year ‒ the highest level of shareholder dissent on executive pay in at least five years.

Full-scale rebellions, where more than 50 percent of shareholders refused to back pay proposals, broke out at seven of the US’s largest companies and three big British companies in 2016. This is the highest count for shareholder revolts since 2012. BP, WPP, Reckitt Benckiser, Anglo American and Oracle were among the big companies to incur shareholders’ wrath, and investors warn there will be further disputes to come.

WPP, Sports Direct, Liberty Media and BP are among the companies highlighted by corporate governance experts as most likely to face a shareholder backlash over their remuneration plans this year.

Shareholder unrest is already having an effect. Last week, British cigarette maker Imperial Brands withdrew plans to raise its chief executive’s pay from £5.5 mn to £8.5 mn in the face of shareholder opposition.

Dominic Rossi, chief investment officer at Fidelity International, which has an uncompromising voting record on big pay, says: ‘I have no doubt the asset management community is increasingly of the view that it needs to put growing pressure on companies over this matter. We see that as a responsibility.’

The fund manager, which oversees $284 bn of assets, will start voting against remuneration committee chairmen this year if a company’s pay plans are deemed unacceptable over two consecutive years.

Calpers, the largest US public pension fund, and Henderson, the FTSE 250 asset manager, have increased their focus on ‘quantum’ ‒ the total amount paid to senior executives ‒ in their assessment of appropriate pay levels this year.

Aberdeen Asset Management, Europe’s third-largest listed fund manager, is adopting a tougher stance on salary increases, and plans to apply a strict focus on pay levels in the US.

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