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Sep 17, 2015

Discontent with remuneration policies marks 2015 UK proxy season

Shareholder rebellions at five FTSE 100 companies plus votes against directors leave unresolved pay issues

The 2015 proxy season in the UK has seen ‘much more purposeful engagement’ but was marked by discontent with governance at several companies, shareholder rebellions over executive pay and high levels of dissent in the elections of certain directors at 17 FTSE 350 companies, according to the National Association of Pension Funds (NAPF).

The NAPF says 12 FTSE 350 companies suffered a second straight year of dissent over executive remuneration, with between 16.1 percent and 43.7 percent of active abstentions or votes cast against their remuneration reports and policies.

At Tullett Prebon, dissent reached 43.7 percent over a discretionary bonus for the new CEO this year, up from 36.2 percent dissenting in 2014. Reckitt Benckiser saw 17.4 percent of votes cast against its remuneration report this year, though this is down from 42.8 percent last year, the NAPF says.

‘As ever, the issue of executive pay continues to attract a great deal of attention and often acts as a lightning rod or proxy for other wider governance concerns,’ says Will Pomroy, NAPF’s policy lead for corporate governance, in a press release. ‘We continue to believe too many remuneration structures are unnecessarily complex and in many cases there remains insufficient transparency around bonus targets.’

The top five shareholder remuneration rebellions on the FTSE 100 include Intertek Group, which saw just over half its investors rallying against a guaranteed bonus for the incoming CEO, and Wm Morrison Supermarkets, which suffered the dissent of 42.3 percent over an exit bonus for its now ex-CEO. Centrica, ARM Holdings and HSBC also saw rebellions over remuneration issues, with dissent ranging from 34.2 percent at Centrica to 29.2 percent at HSBC.

The NAPF says dissent over the re-election of certain directors exceeded 15 percent at 17 FTSE 250 companies and reached a high of almost 40 percent at one firm. The highest level of dissent was against the re-election of SVG Capital director and chairman Andrew Sykes, followed by 31.9 percent against Lynn Fordham, director and CEO of SVG. Subscription TV platform provider Pace saw 27.2 percent vote against or actively abstain from the re-election of Allan Leighton, a non-independent chairman who sits on the remuneration committee.