Not so much revolution as boardroom evolution

Julian Harris
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Is the boardroom evolving in the face of shareholder unrest? (Source: Getty)

We may not be in the throes of a full-on shareholder spring – as happened back in 2012 – but investors are definitely flexing their muscles.

They railed against generous executive pay packages at BP and Anglo American (with 59 per cent and 42 per cent rejecting the remuneration deals, respectively), while smaller double-digit rebellions have been felt at Centrica and, this week, Citigroup. Expect more fireworks at the annual meetings of WPP, Reckitt Benckiser, Aviva, Weir Group and Shire (both today) and, tomorrow, and AstraZeneca.

The discontent at AstraZeneca comes as little surprise. It has been two years since news emerged of a potential takeover by US giant Pfizer, an unrequited advance that culminated in a £55 per share offer that was strongly rejected by the target company. Last night, AstraZeneca’s share price closed below the £40 mark.

In rejecting Pfizer’s overtures, chief executive Pascal Soriot insisted that his company would produce an enviable pipeline of new drugs and propel revenues beyond $40bn (£27.5bn) by 2023. Share­holders and activist groups are now asking why his pay is not more directly linked to that target, and why it is rising healthily while the share price is slipping (it’s down 13 per cent since the start of the year).

Read more: BP must not brush off shareholder revolt over pay

The 2023 target may be unique to AstraZeneca, but its shareholders’ broader complaints chime with those at other companies. Investors tell City A.M. that, even if sales are not entirely on track to meet the target, they do not want to punish Soriot – rather, they just want the factors behind executive pay to be simpler, more transparent, and more closely linked to the company’s performance.

A wave of bumper pay rises and subsequent rebellions paint a gloomy picture. There is, however, a notable degree of optimism in the air. Companies are being pressured (and sometimes embarrassed) into reviewing their pay policies, and many, if not all, are showing signs of reform.

This is no revolution, but it could be even better than that – it could be a period in which the serious, engaged investor is here to stay; in which boards incrementally improve their relationships with disgruntled shareholders and put serious thought into getting better value for money. We must hope this happens. In the meantime, expect more bloody noses.

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