In one of the stormiest AGM seasons in living memory, companies found out exactly what investors thought about excessive pay during the pandemic.
Shareholders have flexed their collective muscle after this year's AGM season saw far more blue-chip companies suffer big protest votes over their annual pay reports.
Research this month by Deloitte found 12% of FTSE 100-listed boards attracted low votes of less than 80% in support of their remuneration reports, compared with 5% the year before.
The stormier shareholder season reflects a wider struggle by companies to ensure they strike a balance between Covid-19 restraint and keeping their leadership incentivised.
The biggest shareholder votes
Deloitte said the reasons for this year's spate of low votes reflected concerns over executive salary being increases above the wider workforce rate, the scale of pay packages for newly-hired CEOs, and the use of discretion to deliver higher bonus payouts.
These issues piqued the interest of more retail investors after just under a fifth of customers registered to vote on the interactive investor platform, with 34% of over 65s doing so.
The top three voted stocks by ii customers this year were Lloyds Banking Group (LSE:LLOY), BP (LSE:BP.) and GlaxoSmithKline (LSE:GSK), with Unilever (LSE:ULVR) in the top 10 after its AGM included emission reduction targets for the first time.
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AstraZeneca (LSE:AZN), which was number six on our list, saw almost 40% of votes cast against the company's remuneration policy, where the potential maximum long-term share award for CEO Pascal Soriot increased to 650% of his £1.3 million base salary, from 550% last time.
The “golden handcuffs” pay arrangement for BAE Systems (LSE:BA.) boss Charles Woodburn also resulted in almost 25% of votes being cast against the company's remuneration report. At London Stock Exchange Group (LSE:LSEG), the new £1 million base salary of CEO David Schwimmer was the trigger for 24% of shareholder votes going against the company.
On Thursday, a large number of B&M European Value Retail (LSE:BME) shareholders pushed back against plans to give chief executive Simon Arora a 23% pay rise in order to reflect the company's blue-chip status and step change in size, scale and complexity.
Arora's salary has been largely unchanged since the company's IPO in 2014, despite a total shareholder return of 167% compared to the FTSE All-Share at 34% over the same period.
The advisory vote on the annual remuneration report was carried with 77.2% of votes, while the binding vote on B&M's new three year remuneration policy got 81.5% support.
Companies striking the right balance
Despite the various blue-chip flashpoints, Deloitte points out that most companies got the balance right after median support of 96% votes in favour of annual remuneration reports.
The accountancy firm's vice chairman Stephen Cahill said: “Shareholders were clear at the outset of the pandemic that decisions on executive pay should reflect the wider workforce, investor and societal impact of the Covid-19 pandemic.
“While the vast majority have shown restraint, investors remain focussed on pay fairness and will vote against remuneration reports where executives are seen to be insulated from the wider stakeholder impact.”
About a quarter of companies also used their AGMs to put new three-year remuneration policies for a binding shareholder vote.
Nearly a third got a low vote from shareholders, primarily due to dissent against increases to maximum incentive awards or a mixed reaction to new restricted share plans, which come with less onerous performance conditions.
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This month's research by Deloitte also revealed how far the pandemic impacted boardroom pay packages in 2021, with one-third of executive directors receiving no annual bonus for 2020. That's a rise from 6% in 2019 as companies used downward discretion to reduce, waive or cancel annual bonus payments.
The median annual bonus payout was 38% of the maximum award, whereas it had been 68% the year before. The annual reports also showed the fourth consecutive year of decline in total CEO pay, which fell to £2.85 million from £3.3 million last year and £4 million in 2017.
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