OUTLOOK: Keep an eye on voting records this AGM season
March heralds the beginning of AGM season in earnest and ought to provide some indication as to whether this year’s will resemble the limp affair of 2013 or something more meaningful, as in 2012.
That was when institutional investors remembered their fiduciary duties to the people who pay their fees (us in other words) by occasionally using their votes.
The biggest fuss heading into this year’s season has yet again been provided by the banks, but is this really justified? Much has been written, including in this column, about the sector’s addiction to unjustified and unjustifiable bonus payments, particularly given that the fact that profits are privatised whereas losses are socialised.
There was no better example of that than Royal Bank of Scotland, which plans to pay out close to £600m despite losing its shareholders (us again) a staggering £8.2bn.
But banking far from the only sector in need of reform. And it is at least having to abide by new regulations designed to ensure that money can be clawed back from undeserving executives whose activities leave their employers, and taxpayers, in a sticky situation (although the EU’s bonus cap doesn’t help on this front).
In fact the travails of the banking industry have arguably enabled City money managers to take their feet of the gas elsewhere, where pretty much anything still goes.
Bonuses are still showered upon the occupants of boardrooms with scant apparent regard for whether they are merited. Retention awards just for turning up to work still exist, as do over-sized payoffs when executives quit after producing under whelming performance.
Then there are the so called long term incentive schemes - supposedly aimed at ensuring bosses think beyond the next quarterly trading update - that are anything but.
They typically pay out lorry loads of free shares worth millions of pounds after as little as three years even though the decisions of the recipients can impact on the businesses they run for many years beyond that period.
On the latter point, things might change a bit thanks to Fidelity, the fund manager which wants executives to hold the freebies for at least five years before they cash in.
It plans to use its votes to ram the point home, and with shareholders having the power to throw out companies’ remuneration policies that actually matters.
However, while having Fidelity voting against them will be embarrassing to many companies, particularly blue chips, it won’t mean a lot if others don’t back it.
Fidelity’s most obvious supporters ought to be insurance companies and pension funds, both of which need long term investments to match long term liabilities that often stretch decades into the future.
Their voting records will make interesting reading in three months time.
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