On January 29, 2018 the Pensions and Lifetime Savings Association (PLSA) published its annual AGM Voting Review. This examines AGM results for the FTSE All Share Index in 2017, highlighting resolutions that attracted ‘significant’ levels of dissent. The PLSA has taken dissent levels of over 20 per cent to be ‘significant’ in line with guidance from the GC100 and Investor Group and the threshold for publication on the Investment Association’s Public Register.
Across the FTSE 350, there were 117 AGM resolutions that attracted dissent levels of over 20 per cent at 73 different companies in 2017. Around 20 per cent of companies in the FTSE 350 experienced significant dissent over at least one resolution at their AGM.
The PLSA found that executive pay was the most controversial aspect of corporate governance, with remuneration-related resolutions being the most common source of dissent.
The PLSA surveyed pension fund members’ views on the executive pay gap between companies’ executives and their wider work force and found that, overall, 85 per cent were concerned. When asked why remuneration is too high, 63 per cent of members responded that ‘large pay packages for under-performing executives are particularly inappropriate, but executive pay is disproportionately high across the board’.
In terms of accountability, the PLSA encourages disaffected shareholders to vote against the re-election of remuneration committee chairs responsible for pay practices when voting against a company’s remuneration policy or report, in order to introduce greater individual accountability over pay. In 2016, average dissent levels over remuneration policies were four times higher than dissent over the re-election of remuneration committee chairs as directors. In 2017, they were less than twice as high, suggesting that most shareholders are now voting against the remuneration committee chair if they vote against the remuneration policy.
In addition to remuneration related-resolutions, the election and re-election of directors’ resolutions also attracted shareholder dissent at 2017 AGMs. The PLSA notes that, overall, there was a slight increase in dissent over directors’ elections in 2016 and 2017 from previous years.
While there has been some progress on individual accountability, the PLSA argues that there is much more to be done. Companies are still failing to effectively explain their employment models and working practices to their shareholders and must improve reporting.
These findings have informed the update to the PLSA’s corporate governance policy and voting guidelines published on January 25, 2018.
(PLSA, Press release: AGM Voting Review, 29.01.18)
(PLSA, AGM Voting Review, 29.01.18)