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Which heavy pay packets will hold up to shareholder scrutiny?

by LLB Reporter
15th Jul 22 6:49 am

As 2022’s Annual General Meeting (AGM) season continues, interactive investor, the UK’s second largest direct to consumer investment platform, explains everything you need to know ahead of the key meetings in the near term.

In the coming weeks, shareholders will get the valuable chance to vote on some hefty pay packets at three major FTSE 100 companies.

Having a say in the companies you have a stake in is a valuable and important aspect of investing. The opportunity set for private investors is huge, but the key is harnessing their collective power.

Executive pay continues to dominate

In the coming weeks, shareholders will have a chance to vote on bonus packages paid to the big bosses of FTSE 100 firms.

This cohort of upcoming meetings comes after shareholder scrutiny on executive pay earlier in the month too. For example, M&S shareholders faced another year without a dividend, yet the CEO received a 1.6 billion bonus – a decision which was then challenged on a public stage at M&S’ AGM last week and met by shareholder rebellion.

Lee Wild, Head of Equity Strategy, interactive investor, says: “Executive pay has, and continues to, dominate 2022’s AGM season. More and more, and especially since the Covid-19 pandemic, companies are bringing executive pay and renumeration policies more broadly, within their ‘ESG’ – environmental, social, governance – goals. Naturally, as well, the current surge in the cost-of-living will also be focussing minds on this topic even more.

“Of course, companies need to incentivise and retain their senior executives, but the key is that this must be done sensitively and needs to be a fair reflection of their work, as well the experience of their workforces, their stakeholders, and ultimately – the end customers.

“For anyone who is perhaps still unconvinced by the value of private investors having their say in such votes, we would reiterate that there is strength in numbers and with collective power, private investors can make their voices heard. Why should the large institutional investors have all of the say?

“A good example is multinational energy company, SSE, which has a very topical AGM ahead. Afterall, the company is giving shareholders a voice on the annual bonus of a whopping £1.15 million to the company’s CEO, Alistair Phillips-Davies. For some private investors, this bonus might feel somewhat tone-deaf, given it comes at a time of spiralling energy and household costs. The remuneration committee says it considered the wider cost of living pressures, but felt that the reward was reflective of performance and that no discretion was required, having applied downward adjustments three times in the previous five years. Voting agency Glass Lewis has said that total remuneration remains reasonable relative to peers

“Vodafone’s AGM is also one to pay close attention to. The CEO, Nick Read, received a £1.45 million bonus despite a lacklustre share price performance.

“And JD Sports Fashion, another FTSE 100 company, could face push-back from its investors after handing out a large pay rise to its finance boss. Though, unsurprisingly,  the company sees the package as ‘fair,’ voting agency Glass Lewis thinks otherwise and has recommended shareholders vote against the annual remuneration report. They view it as inappropriate, given the impact of the pandemic on the business, and its various stakeholders.”

Creating a ‘new normal’ – where private investors can vote simply and easily

Empowering shareholders to use their voice has been a long-standing campaign at interactive investor, and in November last year the platform made it easier than ever for ii customers to vote at company annual general meetings – automatically opting customers in to vote (they can still opt out if they wish).

Customers who are eligible to vote are therefore notified through ii’s ‘voting mailbox’ service.

Lee Wild continues: “Progress is being made, but more work needs to be done, and not just from platforms such as ii, but also by the companies themselves, and the industry more broadly.

“However, we will continue to do all we can to empower private investors to stand up and be heard, and in making the ability to vote online the default for shareholders, we hope to increase the popularity of another aspect of investing that is so valuable.”

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