In the corporate world spring is a crucial period for investors in the UK. It is a time when listed companies traditionally open their doors and hold annual meetings, and investors get the chance to have their say on key matters of leadership and governance. Often, the most interesting stories to emerge are focused on executive pay, with the results of votes on resolutions concerning directors’ remuneration scrutinised by stakeholders and journalists for signs of unrest or even rebellion among the shareholder base.

Even before this year’s Annual General Meeting season was getting into full swing, the issue of executive pay was making big headlines.

Perhaps the biggest story so far has centred on AstraZeneca and the pay of its chief executive, Pascal Soriot. However, the chief executive of abrdn, the Edinburgh-based investment giant, also stoked controversy when it emerged he had been paid a hefty bonus at a time when the company was cutting hundreds of jobs.

Mr Soriot is one of the UK’s longest-serving and highest-paid listed company bosses.

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The 64-year-old businessman is credited with transforming the fortunes of the pharma giant by expanding its portfolio and famously led the company through development of the UK’s first approved Covid vaccine, which began to be rolled out in early 2021.

However, his remuneration has recently been the subject of significant controversy.

In April, nearly 36 per cent of investors voted against a resolution to approve the company’s remuneration policy for 2024, which could mean a £1.8 million pay rise for Mr Soriot. It came shortly after AstraZeneca was heavily criticised for the £18.7m Mr Soriot was paid for 2023, which the High Pay Centre argued could not be justified.

“Pascal Soriot has consistently been one of the highest-paid CEOs in the FTSE 100, getting paid around 1,000 times more than a minimum wage worker and over a hundred times more than many of its own employees,” said Andrew Speke, spokesman for the High Pay Centre, at the time.

“While having effective leadership is clearly necessary for managing a company the size of AstraZeneca, it’s also fair to question whether Soriot’s contribution to AstraZeneca has really been much greater than many of his colleagues, whose expertise and hard work are likely to have also played a major role in the company’s success.”

AstraZeneca has not been the only company to have come under fire over executive pay this year.

Energy industry giants BP, Shell and Centrica have all been condemned by anti-poverty groups and trade unions for the levels of pay awarded to their chief executives, which have surged on the back of record profits. These profits have been driven to a large extent by market forces arising from Russia’s war on Ukraine.

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Campaigners have called into question the morality of executives taking home millions of pounds in salaries and bonuses at a time when many people all across the UK have been struggling to afford to power their homes as energy prices have soared amid the cost-of-living crisis.

Campaign group Global Witness declared in March that the £8m-plus paid to BP chief executive Murray Auchincloss for 2023 – a year in which the company made profits of $13.8 billion – underlined the “sickening reality” of the UK’s “broken energy system”.

Global Witness noted that the pay of Mr Auchincloss was 230 times higher than the UK average salary and equal to the energy bills of more than 4,700 UK households.

“The millions paid out to BP’s chief executive contrasts with the millions of Brits in energy poverty, showing the sickening reality of our broken energy system,” said Alice Harrison, fossil fuels campaign leader at the group.

“People everywhere, struggling to feed their families or heat their homes, have every right to be angry at BP’s huge profits and pay-outs.”

Ms Harrison continued: “The Government is missing the opportunity to introduce a serious windfall tax and CEO bonus tax.”

Global Witness was just as scathing about the pay awarded to Shell chief executive Wael Sawan, whose remuneration for 2023 of £7.9m for the year included a bonus of £5.3m.

Jonathan Noronha-Gant, who is the group’s senior fossil fuels campaigner, branded the pay as a “bitter pill to swallow for the millions of workers living with the high cost of energy”.

He added: “Nothing highlights our broken energy system more than the Shell boss receiving 227 times more money than an average UK worker. Whilst energy executives celebrate making billions from the war in Ukraine, millions of people struggle to heat or feed themselves.

“We need our politicians to prioritise their people and not the polluters who fund them.”

Shell said in its annual report that its results for 2023, which included its second-highest earnings in a decade after setting a record in 2022, reflected “strong management performance, improved operational delivery and the resilience of our portfolio”.

The company reported adjusted earnings of $28bn for 2023, a year in which it returned $23bn to shareholders through its progressive dividend policy. And it declared in February that it would increase its dividend by 4 per cent in 2024, while also undertaking a $3.5bn share buyback.

Given the economic challenges many people have faced across the UK in the last couple of years, the frustration expressed by Global Witness and groups such as trade union Unite is understandable.

And it is perhaps all the more so when confronted by comments made by Centrica chief executive Chris O’Shea, who said in January that his remuneration of £4.5m for 2022 was “impossible to justify”.

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It was then disclosed in March this year that Mr O’Shea’s pay for 2023 had soared to £8.2m, which included £5.9m from long-term incentive plans. Centrica, which owns British Gas, booked an adjusted operating profit of £2.75bn for the year.

“The oil/gas companies cited were all in the top five for biggest CEO pay increases in the FTSE 100 last year, alongside BAE Systems who benefitted hugely from the surge in defence spending following Russia's invasion,” Luke Hildyard, director of the High Pay Centre told The Herald Business HQ.

He added: “It’s obviously ludicrous to claim that this rewarded great leadership or brilliant decision making by the CEO so much as being in the right place at the right time.”

Moreover, it is not just in the energy and defence sectors where executive pay has appeared out of touch.

In late February, it emerged that the chief executive of abrdn had been awarded a bonus of nearly £800,000 at the same the Edinburgh-based investment giant was in the process of axing hundreds of jobs.

The latest annual report of abrdn showed that Motherwell-born Stephen Bird will receive a total bonus of £786,000, equating to 89.8 per cent of his £875,000 salary, for 2023, with his total remuneration for the year (including pension allowance, bonuses and salary) totalling £2.14m.

The report was published as abrdn reaffirmed plans to slash around 500 jobs as part of a restructuring programme announced in January that aims to restore its investment business to an “acceptable level of profitability”.

The challenges facing the business were writ-large in full-year results, published on February 27, which revealed a fall in profits and revenue and further outflows from the company’s investment funds.

One shareholder advisory group recently recommended a vote against the abrdn remuneration report, though it was not because of Mr Bird’s pay.

Glass Lewis said it was unable to support the report “given the newly appointed CFO’s base salary level”, noting that Jason Windsor joined as chief financial officer on a base salary of £675,000 in October, 25.44 per cent higher than the salary of predecessor Stephanie Bruce.

While there is often intense public outrage expressed over executive pay, it is more unusual than not for shareholders to vote in favour of remuneration policies and resolutions on directors’ pay.

The way shareholders view the companies they invest in is naturally different from those who do not have “skin in the game”, with investors seemingly content for leaders to be paid very well as long as the businesses in question are performing strongly and providing good returns.

In recent weeks, the increases in executive remuneration at the likes of BP, Shell and Centrica have correlated with the bumper profits they have been making.

This has given financial firepower to such companies to return huge amounts of cash to shareholders in the form of dividends and share buybacks, which in turn may influence whether investors chose to support remuneration policies or not.

Yet, there are some who argue that UK listed companies are not actually paying their leaders enough. This argument comes amid growing concern that companies are increasingly favouring stock market listings in New York over London – as evidenced by UK chip designer Arm listing on the Nasdaq, for example – and fears of a talent drain across the Atlantic, where bosses have traditionally been paid more.

“CEO pay is outstripping workers’ pay in the UK, as the fight for talent among the higher echelons of executives has intensified globally,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, told The Herald.

“FTSE 100 chief executives are paid 118 times more than the standard full-time worker in Britain. However, in the US the gap is even wider, and this is why London Stock Exchange boss Julia Hoggett has warned that pay at UK companies is too low to compete for top executive talent and retain listings.

“There is concern about the number of UK companies which have opted to list in New York instead and offering more competitive higher salaries to attract sought after executives is considered to be a key part of a recipe to keep London from going further off the boil.

“However, US companies are often much larger with bigger revenues and profits than London-listed companies, accounting for some of the disparity, while UK CEO pay is more in step with that of executives of European companies.”

However, Mr Hildyard declared that “comparison with the US market is flawed for a number of reasons”.

“Firstly, the biggest US companies are vastly bigger than the overwhelming majority of FTSE 100 [firms] so it’s not a like-for-like comparison,” he said.

“Secondly, there is little evidence beyond the anecdotal of UK firms failing to attract or retain CEOs, nor is there a convincing link between higher CEO pay and better business performance so the benefits of higher top pay for anyone but the CEOs remain unclear.”

Roger Barker, director of policy and corporate governance for the Institute of Directors (IoD), noted: “In recent years, the London stock market has struggled to attract company listings. Increasingly, the US is seen as a more attractive place to raise capital.

“However, the argument that inadequate executive pay is the main driver of this trend is far from proven. Companies listing in the US are typically able to achieve higher valuations than their UK counterparts. This is likely to be a more important cause of the exodus than the higher pay packages available to CEOs in the US.”

Proxy adviser Glass Lewis declined to comment publicly on the current UK pay debate when contacted by The Herald. Recently, it advised that shareholders vote against the AstraZeneca remuneration policy, citing the “proposed increase to variable incentive opportunity”. However, it backed a large, proposed pay increase for the boss of medical devices company Smith & Nephew, described in the press as a “US-style pay package”, based on the “compelling rationale” provided.

The rise is proposed in part because the company’s chief executive, Deepak Nath, is based in the US, where much of the medical technology (medtech) industry is focused, and indeed where Smith & Nephew generates most of its revenue and employs the bulk of its people.

While Smith & Nephew is listed in London, the UK accounts for 3 per cent of its revenue and 7 per cent of its employees, while more than 50 per cent of sales are generated in the US, where most of its senior operational managers are based.

The company has identified the need to offer senior leaders a level of remuneration that allows Smith & Nephew to compete with its peers.

Writing in the company’s annual report for 2023, Smith & Nephew chairman Rupert Soames states: “Currently our remuneration policies for executive directors are aligned to the norms of people living and working in the UK; given the small proportion of our revenues that arise in the UK, and the fact that the centre of gravity of the medtech industry is in the US, this is not sustainable if we are to attract and retain people who live and work in the US.

“It is for this reason that our chair of remuneration, Angie Risley, and I have had extensive consultations with our largest investors in recent months and they have confirmed their broad support for our proposals to give Smith & Nephew the ability to attract and retain senior executives in the United States, if we need to do so.”

Smith & Nephew shareholders will be asked to vote on the company’s updated remuneration policy, which includes proposals such as enhance long-term incentives and changes to bonus deferrals, at its annual meeting in London on May 1. It could see Mr Nath’s earning potential rise by up to 30 per cent to a maximum of $11.8m this year.

Responding to questions from The Herald, Chris Rushton, senior director of research policy at Glass Lewis, said: “Regarding the question on energy companies, we highlight that we take the broader stakeholder experience into account when assessing a company’s pay.

“We are not publicly commenting on the current wider debate about the UK pay environment at this time. However, we would like to clarify that we do not have a blanket approach to large, proposed increases to fixed pay/total pay opportunity/retention awards and are assessing each case on its merits, in particular taking into account the rationale provided by a company.”

Asked for its thoughts on the executive pay debate in the UK, the Pensions and Lifetime Savings Association (PLSA), which represents pension schemes that will give a retirement income to more than 30 million savers, underlined the need for a “balanced approach”.

“The PLSA has always recognised the importance of appropriate remuneration policies as a litmus test for wider corporate governance practices among the companies in which pension funds invest,” the PLSA’s deputy director of policy, Joe Dabrowski, told The Herald Business HQ.

“Although we recognise that leaders who manage their companies responsibly and successfully should continue to be valued and appropriately paid, against the backdrop of the ongoing cost of living crisis, it is especially important senior management and boards take a balanced approach to executive pay.

“The PLSA’s annual stewardship and voting guidelines emphasise pension schemes’ duty to act as good stewards of the assets entrusted to their care. That includes exercising voting rights in a way that sends the clearest possible message to companies that repeatedly fail to respond to legitimate investor concerns.”

Perhaps unsurprisingly, trade union Unite was forthright when asked whether UK chief executives should be paid more. In recent times, as the cost of living in the UK has soared, the union has been campaigning hard to ensure thousands of members in a broad range of sectors secure pay settlements that will help them at least partly keep up with rampant inflation and rises in interest rates.

“The idea that CEOs in the UK need higher wages is laughable,” said Unite general secretary Sharon Graham in response to questions from The Herald Business HQ.

“Real wages for everyone else are still significantly below their 2009 peak – an unprecedented 15 years of wage stagnation for UK households. And while workers get poorer, shareholders and CEOs hoard an increasing share of our wealth. CEO pay is now 109 times that of the average UK worker.

“Take the oil and gas giants. Shell and BP alone announced profits of £86bn over the past two years and paid their CEOs £7.9m and £6.5m in 2023, while oil and gas workers in the North Sea are threatened with a jobs cliff edge.

“Collective bargaining remains the most effective way to combat the corporate profiteering and runaway executive pay that blights the UK economy. Trade unions exist to help workers get their fair share of the pie and Unite’s focus on jobs, pay and conditions has delivered £430m back to workers’ pockets over the past two years.”

Mr Hildyard at the High Pay Centre warned that very high pay awards “can drive wider economic inequality which is agreed to contribute to a huge range of social problems”.

He told The Herald: “While pay is not a zero-sum game where less for the senior managers automatically means more for everybody else, it would also be naive to think there's no relationship between the two.

“Companies don’t have infinite wealth and [if] they are spending millions, if not tens of millions on their executives, this has significant opportunity costs including potentially for the pay of middle and lower earning workers, or for investment in innovation and productivity.”

Ms Streeter at Hargreaves Lansdown added that there “seems to be an increasing disconnect between company performance and pay awards which is concerning an increasing number of investors”.

She said: “AstraZeneca’s shares are down 7 per cent over the past year, while Ocado’s shares are down by 31 per cent, so it’s not surprising that influential proxy advisors recommended shareholders voted against the big, proposed increases in pay for the firms’ chief executives, leading to shareholder revolts.

“Although the pay awards were passed, some institutional investors are warning that they will not stand idly by and wave through further big pay increases, which are not linked to performance.

“As the CBI (Confederation of British Industry) has pointed out high pay should be matched by exceptional performance, so it is highly important to demonstrate how high pay will link to the delivery of company strategy.

“After all, the concern is that pay increases of millions of pounds for a handful of executives at the top of organisations could be better spent increasing company investments in technology or staff training to improve productivity and the wider performance of a company.”