Did Vince Cable Sanction This Year’s Shareholder Revolt?

Pay for a FTSE 100 (INDEXFTSE:UKX) CEO has gone from being 60 times the average UK worker to 160 times over the last 15 years.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

2014’s shareholder spring turned into a shareholder summer. Was it all given carte blanche by business secretary Vince Cable? In a speech in March, he announced that he would introduce tougher measures unless remuneration committee behaviour improved. Then, in a letter in April sent to the remuneration chairmen of the 100 biggest UK-listed companies, he warned about the damage big pay deals can have on their image. “At a time when every part of the economy is striving to get more from less, I hope you find yourselves animated by the same spirit…. Unless business is seen to act responsibly, pressure for further action will inevitably result,” Cable wrote.

It started with Barclays, whose CEO later admitted that “a lot more needs to be done” to rein in bankers’ bonuses. The bank withstood four hours of criticism of its bonuses at its AGM, culminating in a rare institutional shareholder rebuke when a representative of Standard Life stood up to announce that it was voting against the remuneration report because “(w)e are unconvinced that the amount of the 2013 bonus pool was in the best interests of shareholders”. Barclays’ pay plans were eventually approved with a small margin.

Shareholder rebellions over directors’ pay continued at Pearson, AstraZeneca, National Express, Standard Chartered, Reckitt Benckiser and online grocer Ocado. Nearly one-third of Reckitt’s shareholders opposed its annual pay report. A fifth rejected the separate pay policy vote; a new, second opportunity to vote on pay policy for the next three years. A fifth of Ocado shareholders also voted against the online grocer’s pay report, objecting to a matching share plan that was due to award chief executive Tim Steiner shares worth more than £12m.

Opposition was often due to criticism by the shareholder body the Association of British Insurers, but most often shareholder advisor PIRC was behind the protests. PIRC encouraged protest against M&S, Sainsbury’s and Sports Direct bonuses and pay plans, as well as at oil firm Afren, G4S, WPP and HSBC. Investec’s pay plan was also opposed, by 44% of shareholders, amid criticism that awards were “excessive”. In the end, most of these plans passed. For example, HSBC had only around 20% of investors voting against the directors’ pay report. But it is widely recognised that even if you have a fifth of shareholders disapproving of pay, you had better start talking to them about it. FirstGroup’s pay approval actually went up this year, from 71% to 80%, but the chief executive still promised a “deep review” of pay.

On the other hand, Kentz was the first company to have its pay plan rejected under the revised rules this year. Luckily, the company has since been acquired by SNC-Lavalin, so it doesn’t have to worry about it anymore. Then in August, another company, Burberry, saw 52% vote against its pay report.

As I said here, the key to most of these votes is performance. Shareholders don’t like high pay and low performance. On the other hand, they will accept low pay and low performance, as at Marks & Spencer, where CEO Marc Bolland declined a pay increase for a fourth year running after the company missed sales and profitability targets. No shareholder revolt there.

So, did Vince Cable sanction these revolts? He certainly was responsible for putting the mechanisms in place for protest to happen. But by lining companies up for a warning at the beginning of the AGM season, he gave shareholders a mandate to object if they felt that companies were not heeding prior warnings.

As High Pay Centre director Deborah Hargreaves has said, the new regulations are not enough to bring top pay down. The Centre’s figures show that pay for a FTSE 100 CEO has gone from being 60 times the average UK worker to 160 times over the last 15 years. Where this level of increase is justified, shareholders are quiet; where it is not, they will protest.


Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

The Motley Fool has recommended shares in Burberry.

More on Investing Articles

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

With a 30% increase since the start of the year, does the Barclays share price still offer good value?

In light of an impressive Barclays share price rally, our writer considers the attractiveness of the bank’s stock relative to…

Read more »

British coins and bank notes scattered on a surface
Investing Articles

How much passive income could we earn from UK shares with just £10 per day?

Even with modest amounts of money to invest, we can still consider investing in the UK stock market to generate…

Read more »

Night Takeoff Of The American Space Shuttle
Investing Articles

3 booming growth shares in the Scottish Mortgage portfolio

Our writer highlights a diverse trio of red-hot shares from the portfolio of Scottish Mortgage Investment Trust. Are any worth…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

2 growth stocks absolutely smashing the FTSE 100

If you think the wider FTSE 100 is having a good year (and it is), check out the gains holders…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Investing Articles

FTSE 100: next stop 10,000?

As the FTSE 100 briefly hits 9,000 points, investors are already looking forward to when the next 1,000-point level might…

Read more »

Investing Articles

Is Burberry ‘back’ as a solid update drives its shares to 17-month highs?

Burberry shares have risen by more than 60% since May's forecast-beating financials. Can the FTSE 250 luxury giant keep rising?

Read more »

Two gay men are walking through a Victorian shopping arcade
Investing Articles

The Burberry share price continues to rise despite falling sales!

Our writer looks at how the Burberry share price responded to the company’s first-quarter trading update, which was released earlier…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

What a crazy day for the share price of this FTSE 250 retailer!

Our writer’s taken time to digest the latest results of the FTSE 250’s Frasers Group. And he likes what he…

Read more »