Shareholder anger over executive pay has reached “fever pitch”, said The Guardian. On Tuesday alone, oil giant Shell, retailer Next and stockbroker Evolution suffered “humiliating” rebellions over executive pay. At the latter two companies, a quarter of shareholders voted against pay schemes, while the vote against Shell’s pay report was just under 60%.
Protests are spreading
Following slumping shareholder returns and widespread rewards for failure, especially in the banking sector, investors have become more militant, said Kate Burgess in the FT. They have also been galvanised by criticism that they have been too passive in recent years, “waving through pay structures at banks that directly fed the culture of risk-taking that led to the financial crisis”. According to proxy-voting agency Manifest, votes against remuneration reports will reach a record high this year.
At Shell, executives were due bonuses if the group came third or better in a table of five oil majors in terms of total shareholder return. It narrowly came fourth, but the company decided that “there wasn’t a bronze medal of difference between third and fourth”, said Richard Fletcher in The Daily Telegraph, and paid directors half the maximum bonus. You’d think Shell “would have learned some humility” after the reserves misstatement scandal, said Alex Brummer in the Daily Mail. Apparently not.
What next?
Protest votes may shame some firms into a U-turn, but investors’ capacity to make changes is limited: the votes on remuneration reports are only advisory. It’s time they were made binding, so bonuses are only paid after shareholders have given their consent, said Nils Pratley in The Guardian. Then investors “might actually get somewhere”.