IT used to be big news if the likes of Standard Life, Scottish Widows, Fidelity and Aviva combined forces to vote against a company’s remuneration report. Such a roster of big British institutions would have had the clout and the votes to make the company reconsider its intentions or risk a very bloody nose. Hence all the excitement about the fact that these four investors are minded to vote against the pay package of Barclays boss Bob Diamond later this month.
Times have changed. Together these shareholders account for just 6.45 per cent of the Barclays shareholder register, a piddling amount compared to the 30 per cent or so held by foreign investors. Chief among these are the ruling families of Abu Dhabi and Qatar, who account for about 20 per cent of the Barclays register, and Blackrock, the US fund manager that holds around 11 per cent. In the words of Peter Mandelson, these foreign investors are intensely relaxed about Diamond getting filthy rich – as long as he is delivering when it comes to strategy and shareholder value. On the latter measure, the Abu Dhabi royal family must be more than happy. It has made about £3bn of profit on its Barclays investment, a sum that dwarfs the £18m or so that Diamond stands to pocket.
It is true that Barclays is something of a special case. The Qataris and Abu Dhabi bought into the bank at the height of the financial crisis in 2008 in a controversial deal brokered by the impeccably-connected Amanda Staveley. Existing shareholders felt the terms on offer to the Middle Eastern investors were too generous (although its worth remembering that most of them balked at the idea of participating in a recapitalisation themselves) while the government wanted Barclays to accept a state bailout.
But the rise of the foreign investor is hardly limited to Barclays. Foreign ownership of shares issued by British companies now stands at 42 per cent, up from a sixth in 1993 and just seven per cent in 1964.
These international shareholders don’t give a fig about what the British establishment thinks about bonuses. They are global investors who take a global view on executive pay, and they have decided that Britain is pretty competitive when it comes to boardroom remuneration.
This internationalisation of British shares will continue apace over the coming years. UK institutions are under pressure from the government to huff and puff more vocally about investor pay, but they are quickly losing the power to do anything about it.
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