Investors not tied to proxy advisers

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Investors in the UK’s largest companies often ignored the guidance of third-party advisers when they voiced dissent about pay in this year’s annual meeting season, according to analysis of shareholder votes.

The finding appears to undermine concerns among European regulators that investors follow too slavishly the recommendations of proxy advisers.

These fears grew in recent months amid the biggest series of shareholder revolts since the UK introduced an annual, non-binding “say on pay” vote a decade ago. In the wake of rebellions at groups including WPP, Xstrata and Prudential, some company executives complained that advisers carried too much influence.

Research by Manifest, the proxy voting agency, looked at the 26 company meetings of FTSE 100 groups where opposition to the remuneration report – as expressed by votes against and abstentions – totalled more than 10 per cent. This list included Pearson, owner of the Financial Times, where 11 per cent of shareholders abstained or rejected the pay report.

In 11 out of the 26 instances the Association of British Insurers had issued “blue top” notes, indicating no significant cause for concern. ISS, the proxy advisers, had recommended voting for pay reports 15 times, although it flagged issues for shareholder attention in most of those cases.

Sarah Wilson, chief executive of Manifest, said investors often used the pay vote as a way of signalling dissatisfaction about a company’s performance generally. She contrasted the revolt at Aviva – where the investors’ rejection of the pay report led to the exit of Andrew Moss, chief executive of the insurer – with the lesser opposition faced by Polymetal International, even though the pay policy at the miner drew heavier criticism from corporate governance experts.

“Historically, shareholders . . . have not felt comfortable voting on individuals, and are much happier voting on structural issues such as reports,” she said. “Addressing this aspect of shareholder behaviour is one of the unresolved challenges of introducing a binding ‘say on pay’ vote, as the government intends.”

The ABI, which represents 17 per cent of investors in UK companies, said the difference between guidance and investor voting might also come from the fact that the trade body did not flag up a departure from corporate governance guidelines in the same way once that policy had received investor approval, even by a narrow majority. So the ABI might not repeat a warning over a company maintaining a pay policy that had previously caused serious concern.

Georgina Marshall, head of European governance at ISS, said the contrast between recommendations and votes was “healthy”, showing that investors turned to proxy advisers for information but made up their own minds on specific companies.

Although this season became known as the “shareholder spring”, the total of 26 meetings at FTSE 100 companies where dissent was more than 10 per cent was below last year’s 32 occasions. Ms Wilson said this difference might be because some of the highest-profile rebellions were at companies outside the FTSE 100, such as industrial materials group Cookson, newspaper publisher Trinity Mirror and Cairn Energy.

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