The Advisors' Blog

– Subodh Mishra, ISS Governance Exchange

Britain’s 2012 annual meeting season, when a wave of investor protest votes on directors’ remuneration swept through U.K. boardrooms, was in the estimation of some a non-event, with dissent levels largely reflecting that evidenced in past years and just four large capital companies seeing majority opposition. For example, an ISS analysis of U.K. remuneration report voting in 2009 found the same number of failed votes–four–and average dissent levels just 0.5 percentage points less than the 10.9 percent evidenced at 216 FTSE 250 companies in 2012.

Still, the impact of what the media dubbed Britain’s “shareholder spring” has been far more profound, lending cover to the government of Prime Minister David Cameron’s plan to introduce binding pay votes for U.K. companies and, arguably, paving the way for tougher pay curbs in continental Europe in the succeeding months. In light of direct and tangential consequences of last year’s voting, a recent paper explores the state of voting on U.K. director pay vis-a-vis that of 2012 to identify trends in support and dissent by company size and business. Key findings include:

– The 2013 U.K. annual meeting season has been far quieter than last year, with most companies seeing gains in shareholder support levels for their remuneration reports over 2012, the year of the so-called “shareholder spring.”
– Fifty-six percent of companies studied this year saw remuneration report support levels rise from 2012.
– While support levels rose for FTSE 100 companies by 2.4 percentage points, they nudged up by a more modest 0.4 points for FTSE 250 firms.
– By sector, Energy companies, including Cairn Energy, Tullow Oil, and BP, saw the greatest gains in overall support levels compared with 2012 at seven percentage points.
– Meanwhile, Materials firms, such as Lonmin, Anglo American, and Glencore International, saw the largest overall decline in average support tallying 1.7 points.
– The U.K.’s Information Technology sector has seen the highest level of support from shareholders on pay practices thus far in 2013 at 93.6 percent on average.
– At the other end, Materials companies netted just 90.3 percent average support.
– Companies seeking to boost support from 2012 have taken to reforming service contract agreements, improving disclosures, addressing concerns over pension benefits, and other steps to successfully mitigate concerns evidenced last year.

The paper also provides a high-level look at how and why some companies fared better this year compared with 2012.