David Prosser: Shareholders raise their voices – but companies are covering their ears

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The Independent Online

Outlook It is almost 12 months since Prudential had to pull the plug on its bid for the Asian insurer AIA, at a cost to the company of more than £300m, but the insurer's chairman finally got his comeuppance yesterday – more than one in five shareholders voted against Harvey McGrath's re-election to the board.

In fact, the revolt at the Pru was just one of three shareholder rebellions in the space of 24 hours, following protests over pay at the AGMs of Standard Life and Lloyds Banking Group on Wednesday. These instances of shareholders flexing their muscles are becoming more common – there have been a string of even bigger protest votes in recent months at companies ranging from Enterprise Inns to William Hill.

Corporate governance campaigners have been pressing for greater shareholder activism for years, but the financial crisis seems to have been a wake-up call. Last year, votes against directors' pay were five times higher than in 2009, which in turn saw a rise on 2008. Some of the lessons from Sir David Walker's report into the extent to which shareholders failed to hold banks to account during the run-up to the crisis are being applied well beyond the financial services industry.

That's good news: it must be healthy that shareholders are now prepared to stick their heads above the parapet more frequently and in greater numbers. Still, let's not get too carried away: what do these revolts actually achieve?

Those targeted in rebellions this week appear to have been supremely unconcerned. Mr McGrath yesterday talked about the "good mandate" he had been handed by Prudential shareholders. On Wednesday, Standard Life's chairman, Gerry Grimstone, said the insurer had no intention of changing its pay policies despite the significant vote registered against its remuneration report.

In fact, it is difficult to think of a single shareholder rebellion during the current vogue for voting against the board that has produced a tangible change of policy. One might point to F&C Asset Management or Mitchells & Butler, where shareholders forced boardroom shake-ups, but both involved unusual circumstances and had a single investor in control of a large stake.

Aside from Prudential, the focus on pay to the exclusion of all other issues isn't ideal either. It's easy to get exercised about pay awards or big bonuses, but there are plenty of other substantive issues around strategy and personnel that are being neglected as a result.

In short, this is no time for complacency. Shareholders are more inclined to make their voices heard than in pre-crisis days. But boards are not necessarily any more willing to listen. Even worse, some companies are using these revolts as a fig leaf, making much of how their more bolshie shareholders have been given their chance to protest, only to carry on just as before.