Montage of stirling and annual membership meetings
Top investors are predicting clashes at companies when annual meetings get under way in April © FT montage

Standard Chartered chief executive Bill Winters last year found out the hard way what can happen when you pick a fight with shareholders.

After close to 40 per cent of the bank’s investors refused to back its pay policy — because of a squabble about pensions — a spat broke out in which Mr Winters called them “immature” and they replied that he was tin-eared. Before the year was out, Mr Winters’ pension allowance was cut in half.

Shareholders are now gearing up to take on more chief executives over pensions and pay in what is expected to be a particularly fraught UK annual meeting season.

Over the next few months, hundreds of listed companies in the UK will propose new pay policies that set out executive remuneration for the next three years — and put them to binding investor votes. The triennial process frequently results in clashes between shareholders and executives.

Top investors are predicting potential clashes at companies including pharmaceuticals group AstraZeneca, UK lender Lloyds Banking Group and shopping centre owner Intu when annual meetings get under way in April.

Two big investors said they had already been in pay consultations with at least 100 UK businesses, as companies attempted to see off any potential rebellion.

“This pay issue is becoming much testier than it has been for some time, partly because executives feel like they are getting it from all angles,” said Tom Gosling, head of PwC’s UK reward practice.

But other investors said companies had not listened to their concerns. Last year, 62 UK companies suffered revolts over pay, according to data from the Investment Association, the UK trade body that represents big investors with £7.7tn in assets. Due to the sheer number of pay policies that will go to a vote this year, investors said they would not be surprised if revolts doubled this time.

“Some companies are clearly just pushing on [with controversial pay policies] and we’ll meet them again at the AGM,” said Euan Stirling, global head of stewardship at Standard Life Aberdeen, the UK’s largest listed asset manager.

These are four of the big issues shareholders are primed to discuss.

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Pay rises

After years of feeling the pressure from investors over egregious rewards, some companies are preparing for a tougher fight this time.

Mirza Baig, global head of governance at Aviva Investors, said there was “clearly a trend of increasing total packages” in some of the pay policies proposed so far, whether across base salaries or various bonus pots.

British shopping centre owner Intu could be among the most controversial as it looks to increase potential payouts for top executives even as it battles a plunging share price and tries to raise more than £1bn in emergency cash.

Jessica Norton, at consultancy Willis Towers Watson, said pay rises were happening only where executives were underpaid compared with peers.

Still, some shareholders are not impressed. “We thought the pay genie had been put in the bottle, but this round of pay consultations we have found that is not the case,” said Mr Stirling. “We have pushed back. It’s too early to know in the season if [boards] are listening.”


After forcing banks such as Standard Chartered and Lloyds to slash pensions for executives last year, investors are turning to non-financial companies, where senior staff often receive far larger pension payments than the wider workforce.

AstraZeneca, miner Anglo American, Rolls-Royce, tarmac-maker CRH and Holiday Inn owner IHG all offer high pension contributions to executives.

Mr Gosling said pensions alignment — where contributions for executives are at a similar level to more junior staff — was the “hottest issue” in 2020. “That has been the cause of the testiest debates between companies and investors, particularly for current directors. It has caused quite a bit of angst.”

The IA has promised to issue “red tops” — its highest level of warning for shareholders — to companies where directors are paid pension contributions worth more than 25 per cent of salary, unless companies have set out a credible plan to fall into line with the rest of the workforce by 2022.

Mr Baig predicted “strong protest votes” at businesses that have not set out a “clear path” to make pensions fair.

Post-employment holdings

IA guidelines announced last year said directors should hold shares for at least two years after they have left the company, a move aimed at ensuring executives focus on the long-term success of the business.

This has proven unpalatable to some executives, who argue they should not have to invest in businesses they have no control over.

Bill Winters, CEO of Standard Chartered.
Standard Chartered chief executive Bill Winters was called ‘tin-eared’ over pay last year © Financial Times

Legal & General Investment Management, the UK’s largest asset manager, said it planned to vote against any company where executives were not required to hold a “significant proportion” of shares — valued at 80 per cent of salary — for two years after their departure.

“We want to encourage the right type of behaviours from executives in post. We want them to focus on the long-term, so when they leave they are not leaving the company in a bad shape,” said Angeli Benham, investment stewardship manager at LGIM.

Bonus plans

Lloyds and BT are among the companies considering overhauling their long-term incentive plan — a type of target-related bonus.

Lloyds has suggested replacing its LTIP with an alternative plan that would cut the maximum payout for its chief executive from 400 per cent of salary to 200 per cent — but give more certainty over the size of the award.

A small number of other companies are proposing similar so-called restricted share plans.

But these are contentious, with many chief executives unwilling to give up the potential of big payouts, while shareholders are concerned that bosses will receive awards regardless of performance.

Freddie Woolfe, head of responsible investment and stewardship at Merian Global Investors, said the fund house supported restricted share plans but argued they should not simply be a “de-risked LTIP”. “It needs to be more revolutionary,” he said.

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