Remuneration topped investor concerns in 2012, UK union finds

UK investors were more likely to vote against pay reports at AGMs last year and less likely to abstain when remuneration was being discussed, according to the latest Trades Union Congress (TUC) fund manager survey.

Studying the voting records of fund managers, pension funds and voting agencies across 2012, the 11th annual fund manager survey from the TUC reveals a drop in support for remuneration.

While 2011 saw three respondents support more than 80 percent of remuneration reports, in 2012 only one did so. Last year also saw respondents supporting an average of 30 percent of pay reports – an 8 percentage-point drop on 2011. Pay issues were cited as the most likely to inspire action by all but one respondent, followed by board structure concerns and capital structure issues.

Despite an overall drop in pay support, however, there remain disparities in the voting positions taken by respondents. Two investors told researchers they had backed the board’s position in 85 percent of management resolutions, while three respondents said they supported less than 20 percent of proposals from management.

The study further highlights the growing influence of foreign investors at UK AGMs. The TUC cites as an example Barclays’ remuneration report and the election of the remuneration committee chair, both of which were opposed by a majority of survey respondents representing most of the UK’s major institutional investors. Despite this opposition, the TUC believes the bank was able ‘to easily win both votes largely due to the support of overseas investors’. It adds that this could be the beginning of an ‘increasingly common trend’, with the Office for National Statistics showing that more than 50 percent of UK shares are now owned by overseas investors.

TUC general secretary Frances O’Grady says in a press statement that while the 2012 results indicated that ‘investors were at last beginning to curb some of the worst excesses of corporate Britain’, that trend has not continued.

‘In 2012, shareholders voted down six remuneration reports, suggesting we might be seeing the emergence of a new breed of more assertive shareholders,’ O’Grady says. ‘Sadly, however, 2013 has failed to live up to expectations. Only three reports have been voted down this year – and none of them were from FTSE 100 companies.’

Researchers also found that all but one of the survey respondents now publish some of their voting data, though the TUC argues that more must still be done. ‘Ten years ago when the TUC first published its shareholder voting survey, only one institutional investor made public its voting record,’ O’Grady observes. ‘Public disclosure is, thankfully, more commonplace now but the level of detail available is still sketchy, with some investors providing much more than others.’