Shareholder spring rebellion is 'not against high pay'

City Editor

Wednesday 20 June 2012

FORMER Aegon UK chief executive Otto Thoresen, now head of the Association of British Insurers (ABI), has claimed the so-called shareholder spring is not about investors rebelling against high pay.

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tim sharp CITY EDITOR

Six companies, including Edinburgh-based oil company Cairn Energy, have been defeated in advisory votes on executive pay and investor opposition has also contributed to the departure of bosses at insurer Aviva, drugs giant AstraZeneca and publisher Trinity Mirror. Giving evidence to a Parliamentary investigation into executive remuneration, Mr Thoresen said: "It has not been about shareholders rebelling against high pay."

Mr Thoresen's interpretation matters because ABI members control more than 13% of the UK stock market and some campaigners against executive rewards had hoped that investor pressure would start to drag down pay.Mr Thoresen told the Treasury Committee that the rebellions instead reflected concerns on lack of investor consultation or a perception executives are being paid richly for poor performance."What we hope and believe is emerging from this is an approach of engagement that is going to address these issues," he said.He said this would "hopefully" lead to fewer votes against company boards.Richard Saunders, chief executive of the Investment Management Association, the trade body for the UK's £3.9 trillion funds industry, said the votes reflected long-running concerns about the performance of particular companies "brought to a head" by the economic downturn and public anger on executive pay."It would not be healthy to be seeing that happening every AGM season," he said."The companies we are talking about are major contributors to the UK economy and major employers."We want them to be well run. We do not want them to be mired in continuous controversy with shareholders."The evidence is that executive pay is still rising rapidly.Figures from corporate governance watchdog Manifest showed that FTSE-100 chief executives were last year awarded average total remuneration of £4.8 million, an increase of 12%.However, the Government is planning to strengthen the hand of investors by making pay votes binding and by making executive pay disclosures more simple and transparent.Mr Thoresen said the relationship between banks and investors was improving.He said that previously "there was engagement - but there was not evidence of change."After the ABI cautioned banks in December it was no longer "business as usual" on pay, he said this was changing."It is not uniform and it is not perhaps fast enough but it is beginning to move."Mr Thoresen also warned that a drive to ensure bank boards are staffed by experienced financiers could undermine board diversity. He said this could undermine scrutiny in areas such as customer service.But he warned that bringing more women on to boards was "likely to be a struggle" because of "the supply problem".

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Shareholder spring rebellion is 'not against high pay'

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