28
Aug
2019

Three in ten top UK companies agree to cut executive pensions after shareholder pressure

28 August 2019

Three in ten FTSE100 companies have pledged to cut their pension payments for executives in response to pressure from shareholders, the IA reveals today as it unveils analysis of data from the 2019 AGM season.

30 companies in the FTSE100 have made significant changes as a results of the IA’s campaign. This includes:

  • Seventeen companies have committed that any new Director will be given a pension contribution in line with the majority of the workforce.
  • Four companies have reduced pension contributions for incumbent Directors immediately.
  • Three companies have appointed new directors with a pension contribution in line with the majority of the workforce.
  • Six additional companies have made multiple changes in this AGM season – reducing contributions for both existing and future directors.

In February the IA set out new guidance stating that investors wanted executive directors to be paid pension contributions in line with the majority of the workforce. The IA’s voting information service, IVIS, highlighted companies that did not meet this requirement over the course of the AGM season.

The analysis also reveals that 28 of the 69 companies (36%) the Investment Association wrote to with the Hampton-Alexander Review in February for only having one or no women on their board, have added at least one additional woman to their board.

Chris Cummings, Chief Executive of the Investment Association, said:

“Shareholders have been very clear they want pension payments for executives to come down to the same level as the rest of the workforce and for diversity on boards to improve. We have seen a clear step-change in the market on both of those fronts during this year’s AGM season, which is welcomed by shareholders. This includes a number of companies and Directors that have shown significant leadership by reducing their pension contributions to be aligned with their employees.

“Shareholders will continue to focus on bringing executive pensions in line with majority of the workforce over the next 12 months. Companies that do not take on board shareholder concerns risk facing yet more shareholder rebellions next year.

“The Hampton-Alexander Review has set a deadline of the end of 2020 for companies to meet their target of at least one third of their board being female. Time is running out for those companies who have not yet to make progress. Shareholders will be keeping a close eye on those companies and will not hesitate to hold these companies to account to ensure they do the right thing. The evidence is irrefutable: boards with greater gender balance outperform their less diverse peers”

Business Secretary, Andrea Leadsom MP said:

“There is now more transparency than ever around the UK’s biggest companies and these results show that important issues of excessive executive pay and diversity on boards are starting to be taken seriously.

“For the first time the UK’s biggest companies will be required to disclose and explain the ratio of their bosses’ pay, and shareholders are already legally required to vote on chief executive pay policy. These are both concrete measures to tackle excessive pay and increase accountability in the workplace.

“We are committed to ensuring the UK’s largest companies become even more transparent and accountable, which is why we have implemented reforms to upgrade our corporate governance framework to ensure the UK remains the best place in the world to work, invest and do business.”

The IA has also today released the latest figures from its Public Register, which tracks rebellions of more than 20% on individual resolutions. The results show how the Register is driving shareholder engagement, as 86% of companies who faced significant dissent are now acknowledging it and setting out how they will engage with shareholders to address their concerns. This is up from 58% when the Public Register launched in December 2017.

The latest figures from the IA’s Public Register also show that:

  • Overall, there was a 5% increase in  shareholder dissent in 2019 as in 2018, with 126 companies and 251 resolutions appearing on the Public Register this year, compared with 120 companies and 237 resolutions in 2018.
  • Director re-election and pay were again the two largest sources of shareholder rebellions.
    86 resolutions on director re-election appeared on the Public Register so far this year (34% of all resolutions on the Public Register), compared to 80  (34%) in 2018 and just 38 (20%)  in 2017
  • 60 remuneration resolutions appeared on the Public Register, (24% of resolutions) compared with 61 (26%) in 2018 and 68 (36%) in 2017.

Commenting further on the 2019 Public Register data, Chris Cummings, Chief Executive of the Investment Association, said:

“The Public Register is changing how companies engage with their shareholders. The significant increase in the number of companies acknowledging shareholder dissent and setting out how they will engage with shareholders to address their concerns shows the spotlight the Public Register has put on companies is driving change in company behaviour and holding them to account.

“This year’s figures show that while the overall level of shareholder rebellion was in line with last year, director re-election and pay continue to be hot issues for investors. Companies would do well to ensure that they are meeting shareholder expectations on these issues or risk more reputational damage as shareholders decisively cast their vote in the interests of savers and investors”.

For further information, please contact:

Ben Rathe, Senior Communications Manager: [email protected] 

T +44 (0)20 7831 0898

Helen Ayres, Communications Manager: [email protected] 

T: +44 (0)20 7269 4620

David Parton, Communications Executive: [email protected]

T: +44 (0)20 7269 4625

IA press office: [email protected]

About the Investment Association (IA):

  • The IA champions UK investment management, supporting British savers, investors and businesses. Our 250 members manage £7.7 trillion of assets and the investment management industry supports 100,000 jobs across the UK.
  • Our mission is to make investment better. Better for clients, so they achieve their financial goals. Better for companies, so they get the capital they need to grow. And better for the economy, so everyone prospers.
  • Our purpose is to ensure investment managers are in the best possible position to:
    • Build people’s resilience to financial adversity
    • Help people achieve their financial aspirations
    • Enable people to maintain a decent standard of living as they grow older
    • Contribute to economic growth through the efficient allocation of capital.
  • The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.
  • The UK is the second largest investment management centre in the world, after the US and manages 35% of all assets managed in Europe.