Companies warned against ignoring pay revolts by their shareholders

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The Independent Online

Investor groups have raised alarm about shareholder pay revolts being ignored, after a series of big votes against remuneration reports were publicly dismissed by companies.

The Association of British Insurers (ABI), the National Association of Pension Funds (NAPF) and Pirc have lined up to warn companies that winning the vote against a major revolt is not a victory. Instead, they insist a revolt should trigger talks over investors' concerns.

Their attack on boardroom complacency comes after a number of extraordinary votes at annual meetings this year that showed institutional shareholders taking a stronger line on executive pay. The most recent revolt came at the Misys annual meeting last month, when 37 per cent of votes were cast against the remuneration report. The software group's response was that it listened to its investors but had won a clear majority for the pay plan.

Other companies that have had major uprisings on pay this year include Ladbrokes. In May, shareholders delivered a 29 per cent vote against the pay plan, with more than 40 per cent withholding support. At the time, the bookmaker said it had noticed the disquiet registered by some investors and had "recorded it for future reference".

Aberdeen Asset Management also suffered a 29 per cent opposition on pay at its January AGM, with lack of approval reaching a third of votes including deliberate abstentions. Aberdeen said it won the vote clearly and that it needed the right pay policy to retain its "world-class talent".

WPP had a huge 42 per cent vote against its remuneration report in June. Sir Martin Sorrell, the advertising group's chief executive, responded that the unrest was "a matter of excessive micro-managing".

Pirc is pointing out these public responses to its clients. The Association of British Insurers let non-executive directors know that a 75 per cent vote in favour was not a victory when it set out its revised pay principles last month. Marc Jobling, head of corporate governance at the ABI, said: "Since the crisis began, there has been an uptick in the level of dissent and some companies may have been badly advised that it was about getting it through the vote."

Misys, WPP and Aberdeen Asset Management declined to comment. Ladbrokes said the unpopular measure was a one-off.

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