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Shareholder rebellions gather pace with Shire pay revolt Shire and Weir bosses feel sting of investor ire as pay revolts widen
(about 5 hours later)
Shareholder rebellions over pay have gathered pace, with the majority of investors at Shire pharmaceuticals failing to support a 25% pay rise for its chief executive, Flemming Ørnskov. Boardroom bosses have received stinging rebukes over pay, with the engineering group Weir forced to abandon potential share awards for its top management team and Shire Pharmaceuticals failing to get a majority of investors to support its pay deals.
The increase in his salary to $1.7m (£1.2m) means Ørnskov’s bonuses are also going up, a move which shareholders had been urged to protest against before the annual meeting on Thursday. On a dramatic day in the annual general meeting season, the building materials group CRH also suffered a 40% vote against its pay policies as investors showed a renewed willingness to protest against large pay deals in scenes reminiscent of the 2012 shareholders’ spring.
The advisory pay vote squeezed through, as holders of 50.5% of the shares in the Dublin-based but London-listed FTSE 100 company voted in favour – but if deliberate abstentions were included, support for the board fell just below 50%. Weir, a FTSE 250 company, suffered the biggest embarrassment with 72.4% of investors voting against its pay policy, one of the largest rebellions since shareholders were given a “say on pay” in 2013. The vote on pay deals for the next three years is binding, unlike the report on the previous year’s pay, which is advisory.
It builds on the defiant mood in which the AGM season started earlier this month when there were “no votes” at two FTSE 100 companies – BP and Smith & Nephew – on the same day. Mining company Anglo American has also faced protests over pay, with more than 40% of investors voting against its remuneration report last week. Sarah Wilson, the chief executive of the advisory group Manifest, said: “This is one of the most significant voting results of all time.”
Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, which voted against the pay report at Shire, said: “This year has seen a ‘spring of discontent’ for a number of major British companies, with shareholders demonstrating their unhappiness at the remuneration packages awarded to top executives last year at a time when company performance was lacklustre at best.” It builds on the defiant mood in which the AGM season started earlier this month when there were no votes at two FTSE 100 companies, BP and Smith & Nephew, on the same day.
Protests were expected on Thursday not only at Shire but also at another FTSE 100 company, CRH. The FTSE 250 Tullow Oil and Glasgow-based engineer Weir are also facing protests, with investment management firm Hermes among those urging pay revolts. Next week’s AGMs at Reckitt Benckiser and Standard Chartered are also in shareholders’ sights. Rebellions also continued at FTSE 100 companies on Thursday. At the Dublin-based Shire, an advisory pay vote squeezed through with only 50.5% in favour of a 25% salary rise for CEO Flemming Ørnskov to $1.7m (£1.2m). If deliberate abstentions were included, support fell to just below 50%.
Fund manager Schroders was also facing protests against the elevation of Michael Dobson from chief executive to chairman, although 48% of shares are held by the controlling family, which backed the move. At CRH a 40% vote against its pay policy was not binding because the company is also based in Ireland.
In London, Barclays faced criticism of its pay, culture, the cut to its dividend and any possible links to the Panama Papers at its AGM on Thursday. Ashley Hamilton Claxton, a corporate governance manager at Royal London Asset Management, said: “This year has seen a ‘spring of discontent’ for a number of major British companies, with shareholders demonstrating their unhappiness at the remuneration packages awarded to top executives last year at a time when company performance was lacklustre at best.”
The bank’s chairman, John McFarlane, told investors he was taking personal responsibility for restoring its fortunes after cutting the dividend and putting its once coveted African operations up for sale. Weir is now going back to the drawing board to devise new bonus schemes for its senior executives, including its chief executive, Keith Cochrane. It had wanted to award Cochrane up to 165% of his £750,000 salary in shares, but while this was less than the 250% he currently stands to receive, there were no performance criteria to qualify for the award.
In March, Barclays’ new chief executive, Jes Staley, stunned the City by cutting the dividend for 2016 and 2017, despite a pledge by McFarlane to bolster returns. Weir had argued it needed to change its pay deals because of its exposure to volatile commodity markets. Shire, meanwhile, insisted its chief executive had presided over stellar performance at the drug maker. CRH said it would “contact individual shareholders to more fully understand their perspectives, as appropriate”.
Michael Mason-Mahon, a familiar face at many AGMs of major companies, urged McFarlane not to sell the Barclays’ Africa operations to the bank’s former chief executive Bob Diamond, who said earlier this week he had funding in place to consider making an offer. “I’d rather take a lollipop from the devil himself,” Mason-Mahon said. On a day in which more than 25 London-listed companies held their annual meetings, Schroders shareholders registered their frustration with the fund management group’s elevation of Michael Dobson from chief executive to chairman. Nearly 15% voted against his re-election, and almost 12% voted against Lord Howard, the senior independent director who oversaw the move. Hermes, which represents pension funds and had urged other investors to oppose Dobson’s promotion, voted against both.
Another regulator attendee, John Farmer, said the new strategy to pull back from continental Europe and Asia to become a “transatlantic bank” was arbitrary. He prompted applause from other shareholders when he said bankers’ pay was out of control and out of kilter. It is a sizeable protest vote, given that the Schroder family owns 48% of the shares. Howard told shareholders the company, whose own fund managers exercise votes on pay, was aware that it was breaching the corporate governance code, but defended the promotion. “We thought he was such a good and such an obvious candidate,” he said.
“Although you are cutting shareholder returns, your board hardly seems to be suffering, would it not be an appropriate gesture if some of you withheld this remuneration while you sort yourselves out?” Farmer said. At the estate agents Countrywide, there was a 20% vote against pay while Barclays faced criticism of its pay, culture, the cut to its dividend and any possible links to the Panama Papers – although at the end of the long meeting it escaped a rebellion over pay with a 6% protest vote.
McFarlane insisted the bank had cut bonuses and was not paying as high as rivals, although one shareholder was not impressed at being told the bonus pool was £1.6bn compared with £1.1bn to shareholders. “You got more than we did,” the shareholder said. The bank’s chairman, John McFarlane, told investors he was taking personal responsibility for restoring its fortunes after cutting the dividend for 2016 and 2017 and putting its once coveted African operations up for sale.
At Schroders’ AGM, Lord Howard, senior independent director who also chairs its remuneration committee, said the company was aware that it was breaching the corporate governance code by making Dobson chairman, but defended his promotion. “We thought he was such a good and such an obvious candidate,” he said. Michael Mason-Mahon, a familiar face at many major companies’ AGMs, urged McFarlane not to sell Barclays’ Africa operations to the bank’s former chief executive Bob Diamond, who said earlier this week he had funding in place to consider making an offer. “I’d rather take a lollipop from the devil himself,” Mason-Mahon said.
One of the biggest fund managers in the City, Schroders had consulted its 10 largest investors, and “overall we received considerable, a lot of support” although he admitted that there were “some shareholders who had concerns”. Howard said the company would continue to talk to them. Another regular attendee, John Farmer, drew applause from other shareholders when he said bankers’ pay was out of control and out of kilter.
At Barclays McFarlane told investors that the bank’s staff numbers would fall by 50,000 to 80,000 as a result of the disposal of Barclays African, and said he hoped a “respectful” dividend level could be reintroduced. McFarlane insisted the bank had cut bonuses and was not paying as highly as rivals, although one shareholder was not impressed at being told the bonus pool was £1.6bn compared with £1.1bn to go to shareholders. “You got more than we did,” they said.
“I take full personal responsibility for the situation of the company, as does the board. The issue is ours to fix, and fix it we will. It does though leave a great deal to do,” he added. “I take full personal responsibility for the situation of the company, as does the board. The issue is ours to fix, and fix it we will. It does though leave a great deal to do,” McFarlane said.
Staley, who spent much of his career at JP Morgan, addressed shareholders after five months in the role. “You have been patient long enough,” he said. “Like you I am a Barclays shareholder,” he added, pledging to increase the dividend “over time”. Barclays’ chief executive, Jes Staley, who spent much of his career at JP Morgan, addressed shareholders after five months in the role. “You have been patient long enough,” he said. “Like you I am a Barclays shareholder,” he said, pledging to increase the dividend “over time”.
Staley added: “I want to help to restore our profession to the esteem and respect that it enjoyed when I first joined it – esteem and respect that I certainly feel for my colleagues in Barclays as I see the way in which they serve our customers and clients every day.” He added: “I want to help to restore our profession to the esteem and respect that it enjoyed when I first joined it, esteem and respect that I certainly feel for my colleagues in Barclays as I see the way in which they serve our customers and clients every day.”
McFarlane, chairing his first Barclays AGM, said: “Being on a bank board today is not for the faint-hearted and identifying people of the right calibre can be daunting. Fortunately, the Barclays name is able to attract people with the finest credentials.” As the Barclays AGM drew to a close, the Competition and Markets Authority revealed the bank had written to 10,000 customers with payment protection insurance to apologise after it failed to send them annual statements telling them how much they were spending on their policies and outlining their rights to cancel them.