Shareholder dissent over executive pay is spreading from the UK's largest companies to their smaller peers, according to new research from the Investment Association.
The investment manager trade body has revealed that in the FTSE 250 tier, there was a 100 per cent increase over the last year in the number of companies which received 20 per cent or more of votes against their remuneration resolutions. This is in contrast to a 35 per cent decrease among FTSE 100 companies.
The FTSE 350 saw similar unrest, as companies overall saw a 400 per cent increase in votes against the re-election of a director.
“The UK’s largest companies are showing encouraging signs that they are listening to shareholder and wider concerns about executive pay,” said business minister Margot James.
“But with an increase in the number of shareholder rebellions at FTSE 250 firms over bosses’ pay packets, we cannot afford to take our eye off the ball.”
Sarah Wilson, the chief executive of shareholder governance and sustainability research group Manifest, said: “It's good to see that shareholders have noticed these issues. We have been saying that if small cap companies get engagement right, it will be a good thing as they grow.”
However, she added that the implication that issues of executive pay have been addressed in FTSE 100 companies may just be an illusion. Manifest statistics show a record number of resolutions were withdrawn this year before being put to the vote – meaning that shareholders may never have had the chance to express their dissatisfaction.
John Hunter, director of the UK Shareholders' Association, added that FTSE 100 companies may have “listened to the pressure but not the general issue, which is that the pay of chief executives is out of kilter with other jobs and this is bad for the country”.
Some institutional investors feel that boards have taken the “bare minimum” of action to avoid negative votes, according to Stefan Stern at think tank The High Pay Centre.
“It would be unwise to take one year's show of belated and modest restraint as a sign that the system on top pay is working. It clearly isn't,” Stern said.
“There has to be continued pressure from both shareholders and government to improve the situation where top pay still soars above that of everybody else, where tiny or non-existent pay rises are the norm.”
Business minister Margot James noted that the government's “responsible business reforms” would be published shortly, and “will improve boardroom accountability”.