Increasing number of investors vote against FTSE 250 pay deals

Mar 06, 2020
Remuneration resolutions at FTSE 250 firms rise by more than 20 percent since 2018

Around a quarter of FTSE All-Share companies were subject to shareholder discontent and appeared on the Investment Association’s (IA) Public Register in 2019, with a high percentage of shareholder votes opposing FTSE 250 companies’ remuneration packages during last year’s proxy season, reveals the association.

The register records whenever there is at least 20 percent of shares voted against a corporate board decision at an annual general meeting or general meeting. 

The lobby group, which represents 250 fund managers with £7.7 tn ($9.9 tn) in assets under management, saw 158 UK public companies appear on the register in 2019, up from 151 listed firms subject to protest votes in 2018. 

  Total  FTSE 100 FTSE 250 FTSE Small Cap
Number of companies on the public register in 2019 158 21 70 67
Number of companies on the public register in 2018 151 21 55 75
Number of resolutions on the public register in 2019 298 35 131 132
Number of resolutions on the public register in 2018 294 30 115 149
         
Number of pay-related resolutions on the public register in 2019 76 18 36 22
Number of pay-related resolutions on the public register in 2018 74 18 28 28
Number of director-related resolutions on the public register in 2019 103 8 43 52
Number of director-related resolutions on the public register in 2018 105 5 47 53

Source: Investment Association

Companies appearing on the register for more than one issue include those subject to resolutions on remuneration reports, pay-related matters and votes cast against re-electing certain directors. In 2019 the number of resolutions went up to 298 from 294 in 2018, indicating growing investor discontent with board decisions.

Spotlight on remuneration policies 
Shareholder opposition votes on FTSE 250 remuneration packages rose significantly during the last year. In 2019, the number of pay-related resolutions on the register rose by just over 28 percent on the previous year, from 28 to 36. For FTSE 100 cases, the number of pay-related resolutions remained steady in 2019 compared with 2018, with 18 remuneration resolutions voted against in both years.

Andrew Ninian, IA’s director for stewardship and corporate governance, tells IR Magazine that ‘FTSE 100 companies often lead the way in implementing changes and tend to react more quickly to shareholder requests, whereas it can sometimes take more time for FTSE 250 companies.’

In total, 76 pay-related resolutions were registered in 2019, an increase of 3 percent on 2018. Some companies had multiple remuneration resolutions voted against.

The re-election of board members remained another key concern for shareholders in 2019. The number of director-related resolutions ticked down to 103 last year from 105 in 2018. Despite the slight decrease, the significant number of cases in the last two years reflect increased scrutiny of director elections.

A continuing trend
Executive compensation is expected to remain in the spotlight in the UK in 2020, notes Ninian. ‘Investment managers are keeping up the pressure on companies to align executive pay with their long-term strategy,’ he says.

‘With a quarter of FTSE All-Share companies ending up on the register in 2019, investment managers will be paying close attention when companies bring their pay policies to the table to see whether they’ve heeded the high levels of dissent.’
 

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