Stewardship in 2012. Suffolk County Council: Stewardship in 2012 Introduction Presentation to:...

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


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.


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?


Developments in stewardshipAverage votes against remuneration reports

Average oppose vote: 9%

Median oppose vote: 4%


Developments in stewardshipRange of votes against remuneration reports


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


Developments in stewardshipChief executives forced out


Developments in stewardshipSilent assassins?

Vote against: 0.08%

Vote against: 4.6%

Vote against: 14.6%


Developments in stewardshipVoting on director elections


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.


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?



ISC framework published Stewardship Code goes live


Developments in stewardshipWhat disclosure of voting records shows

Asset manager votes on FTSE100 remuneration reports in 2011


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.


Further information


Contactwww.pirc.co.uk

Tom PowdrillHead of CommunicationsEmail: [email protected]: +44 20 7392 7887

Regulated by the FSA

Stewardship in 2012. Suffolk County Council: Stewardship in 2012 Introduction Presentation to:...

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