Stewardship in 2012
Suffolk County Council: Stewardship in 2012
Introduction
Presentation to: Suffolk County Council, 25th July 2012
Presentation from: Tom Powdrill, Head of Communications
Regulated by the FSA
Church Investors Group: Stewardship in 2012
Agenda
Suffolk County Council: Stewardship in 2012
AgendaKey points
– The ‘Shareholder spring’: A season of revolts over top pay and other governance concerns.
– New shareholder powers: BIS has set out some new reforms for tackling executive pay.
– Voting disclosure: Increasing expectations of accountability on the part of shareholders.
– The Kay Review: Report of the review into UK equity markets and long-term decision making.
Suffolk County Council: Stewardship in 2012
Developments in stewardshipShareholder opposition to top pay
– A renewed wave of pressure: We estimate that the level of shareholder opposition to remuneration reports is up 50%.
– A record year: WPP’s defeat last week makes six in total for 2012 so far. The previous highest was five in 2009.
– Widespread support: There is a general consensus that shareholder activism on top pay is a good thing.
– Concerns about performance: Big votes against Barclays, Trinity Mirror and Aviva reflected shareholder concern about the mismatch between pay and performance.
– Concerns about quantum: This season shareholders seem to be willing to oppose remuneration policies on the basis that directors are receiving too much.
– Political pressure: Shareholders feel obliged to be seen to act?
Suffolk County Council: Stewardship in 2012
Developments in stewardshipAverage votes against remuneration reports
Average oppose vote: 9%
Median oppose vote: 4%
Suffolk County Council: Stewardship in 2012
Developments in stewardshipRange of votes against remuneration reports
Suffolk County Council: Stewardship in 2012
Developments in stewardshipRange of votes against remuneration reports
Suffolk County Council: Stewardship in 2012
Developments in stewardshipBig votes against pay this season
Company Oppose % Abstain %Poll oppose
% Suffolk
vote
WPP 59.06 0.77 59.52 Oppose
Aviva 49.43 9.13 54.41 Oppose
William Hill 48.26 3.26 49.89 Abstain
EasyJet 44.29 0.04 44.31 Oppose
Xstrata 35.21 3.61 36.54 Oppose
AVEVA 31.77 7.83 34.47 Oppose
Cookson 31.62 0.92 31.91 Oppose
Spirax-Sarco Engineering 31.15 1.04 31.48 Oppose
Prudential 28.90 4.69 30.33 Oppose
Barclays 25.21 6.25 26.90 Oppose
Suffolk County Council: Stewardship in 2012
Developments in stewardshipChief executives forced out
Suffolk County Council: Stewardship in 2012
Developments in stewardshipSilent assassins?
Vote against: 0.08%
Vote against: 4.6%
Vote against: 14.6%
Suffolk County Council: Stewardship in 2012
Developments in stewardshipVoting on director elections
Suffolk County Council: Stewardship in 2012
Developments in stewardshipBIS strengthens shareholder powers on pay
– A binding vote: A new forward-looking vote on pay policy that will be binding on the company if defeated. It will be an annual vote, unless companies commit to a three year policy.
– Advisory vote: The existing advisory vote remains and will be focused on implementation of remuneration policy.
– Exit payments: The company must set out its position in the remuneration policy, which will bind the company.
– Vote thresholds: A simple majority on both votes, but if a company receives substantial minority opposition they should issue a statement . The Govt had floated a higher threshold.
– What we think: The binding vote will certainly give shareholders more power, but will they use it? Also the retreat on thresholds could mean only a handful of companies face serious pressure.
Suffolk County Council: Stewardship in 2012
Developments in stewardshipDisclosure of voting records
– Shareholder accountability: PIRC believes that public disclosure makes those exercising economic power more accountable.
– Current position: It remains voluntary for shareholders whether to disclose their record or not.
– Best practice: Stewardship Code says investors should disclose, ISC issued a ‘framework document’ in 2007.
– Current practice: Many of the larger asset managers disclose, though in different formats, but the majority of Stewardship Code signatories do not.
– Kay Review: May say something on voting disclosure?
Suffolk County Council: Stewardship in 2012
Developments in stewardshipDisclosure of voting records
ISC framework published Stewardship Code goes live
Suffolk County Council: Stewardship in 2012
Developments in stewardshipDisclosure of voting records
Suffolk County Council: Stewardship in 2012
Developments in stewardshipWhat disclosure of voting records shows
Asset manager votes on FTSE100 remuneration reports in 2011
Suffolk County Council: Stewardship in 2012
Developments in stewardshipThe Kay Review
The review’s principal focus is to ask how well equity markets are achieving their core purposes:
• to enhance the performance of UK companies; • to enable investors to benefit from this in the form of returns.
It is considering:
• whether market participants are excessively short-termist • if so, what actions might be taken to address this.
It is examining the incentives, motivations and timescales of all participants in the equity markets – from end investors, through pension funds, advisers, fund managers, and the markets, to company boards – and the relationships between them.
Suffolk County Council: Stewardship in 2012
Further information
Suffolk County Council: Stewardship in 2012
Contactwww.pirc.co.uk
Tom PowdrillHead of CommunicationsEmail: [email protected]: +44 20 7392 7887
Regulated by the FSA