Shareholder discontent grows over executive pay

Pascal Soriot. Rex
Astrazeneca's Pascal Soriot. Photo: Chris Ratcliffe/Pool/EPA-EFE/REX/Shutterstock

This year’s annual general meeting season has been marked by several significant rebellions by shareholders over senior employees’ pay and bonuses, with AstraZeneca being the latest to see a revolt.

News emerged last Friday that the Cambridge-based pharmaceutical multinational had been hit by one of the largest shareholder revolts over executive pay this year, when more than a third of investors failed to back its remuneration report.

Shareholders opposed a £9.4m pay package for chief executive Pascal Soriot, aligning themselves with comments from advisory group International Shareholder Services that a £1.9m bonus for the chief executive was “not suitably aligned with performance”.

Another advisory group, Pirc, had stated that shareholders should vote against the pay report, arguing that targets set by the remuneration committee were not sufficiently stringent.

Also last week, shareholders of London-based Cineworld, Europe’s second largest cinema operator narrowly approved proposals to award the chain’s boss a maximum pay packet of more than £3m.

Shareholder advisory group ISS had recommended shareholders vote down the remuneration plan, saying that the majority shareholder, the Greidinger family, already “have a significant stake in the business and it is entirely justified to question the motivational impact of an additional 100% of salary as bonus”. More than a third of investors (34%) voted against the proposals.

In April the chain was forced to back down on earlier remuneration plans, after shareholders fought back against a new bonus scheme.

Cineworld is the owner of Picturehouse Cinemas, where staff have been involved in long-running industrial action and campaigning over pay, sick leave and union recognition.

A significant shareholder protest is considered to have taken place when 20% or more vote against proposals.

On this basis, companies including investment giant Melrose (which recently purchased engineering giant GKN), housebuilder Persimmon, Unilever, Ocado, William Hill, storage provider Safestore Holdings and building materials specialist CRH, have also suffered large-scale rebellions over pay in 2018, as investors respond to concerns from politicians and the public over bloated pay packages.

Among the first UK companies this year to actually lose a vote on executive pay was satellite-maker Inmarsat – 60% of its shareholders voted against the company’s pay report on 2 May. And in late April 92% of shareholders in FTSE 250-registered engineering firm Weir voted to end its executive reward scheme and halve the maximum equity awards for top executives.

Theresa May has made the need for companies to exercise restraint in pay awards a theme of her leadership, announcing in 2017 that bosses who “milked their companies” had become the “unacceptable face of capitalism” and proposing in the Conservatives’ manifesto that the next Tory government would legislate to make executive pay packages subject to strict annual votes by shareholders.

However, last year’s proposals left this promise unfulfilled, with companies having only to publish information about pay ratios at their companies, with no requirement to hold shareholder votes on pay.

Research published by the CIPD and High Pay Centre last August found that executive pay had fallen by 17%.

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