The year of the activist shareholder: Vocal investors rebel more as FTSE companies struggle to get directors re-elected and pay approved
Investors in FTSE companies are becoming more activist, with a 29 per cent jump in shareholder votes against the re-appointment of directors, according to new data shared with City A.M.
In total 42 directors have been subject to major dissenting votes against their re-election, compared to 30 in 2020, according to a new report from Thomson Reuters, showing that the boards of the UK’s biggest 350 companies are subject to increasing levels of scrutiny.
All directors in UK-listed companies are subject to annual re-election.
In total, 17 of the 42 directors to receive substantial votes against (SVAs) their re-election were members or chairs of audit committees.
Twenty four were members or chairs of remuneration committees and 29 were members or chairs of nomination committees. Some of the directors receiving SVAs belonged to one or more committees.
There has also been a fall in votes received in favour of director salaries in FTSE 350 annual remuneration reports, from 94 per cent of votes last year to 91.6 per cent this year.
Analysis by PwC shows chief executive pay in the FTSE 100 has fallen by almost 10 per cent in the past year following increased focus on pay levels from shareholders. Around 60 per cent of FTSE 100 companies now include ESG measures as part of their executive incentive plans.
“Those who run the UK’s largest companies are finding themselves under increased scrutiny from investors,” commented Hilary Owens Gray, Director, Practical Law at Thomson Reuters.
“Shareholders are becoming more vocal in making sure companies set sensible remuneration targets for directors and address how they are going to play their part in tackling climate change.”Hilary Owens Gray
“With investors placing increasingly greater focus on ESG criteria, if companies don’t map out how they are going to meet expectations on ESG, we can expect the trend of heightened shareholder engagement to only increase further in 2022.”
There has also been a significant leap in climate-related shareholder resolutions in 2021 with 16 resolutions proposed.
This compares to only five resolutions tabled in 2020 and just three in 2019. Pressure from investors on companies and boards to address the climate crisis has continued to increase.
Thomson Reuters’ report showed this can be partly attributed to pressure from the Say on Climate initiative. This encourages listed companies to table a climate action plan at their AGM for a shareholder vote.
The boards of ten FTSE 350 companies proposed their own climate-related resolutions in 2021, all of which were passed at the AGM.
However, of the four shareholder-requisitioned resolutions on climate matters none were passed.
The UK Government intends to make it mandatory for large companies and financial institutions to make climate-related disclosures by 2025. This is aligned with the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations.