F&C warns management over short-term pay deals

Click to follow

F&C Asset Management, one of the country's top five investors with £125bn under management, refused to back more than one-fifth of UK management pay deals last year.

F&C Asset Management, one of the country's top five investors with £125bn under management, refused to back more than one-fifth of UK management pay deals last year.

Its annual voting and governance report published yesterday revealed that it voted against 12 per cent of remuneration-related resolutions at annual meetings and abstained in a further 10 per cent.

Companies that were the subject of its disapproval included Compass, BOC, Imperial Tobacco and WH Smith.

F&C has also written to all the companies in the FTSE 350 warning them it will vote against companies that fail to detail social, environmental and ethical issues in their report and accounts. "F&C believes social, environmental and ethical issues can be material to a business and considers annual reports to be incomplete if they fail to cover these. F&C will increasingly vote against FTSE 350 companies in the UK that do not comply with the Association of British Insurers' guidelines," the company, said.

The fairness of remuneration packages in British companies is improving, according to F&C, but problems remain. A big concern is the replacement of long-term incentive plans with deferred bonus plans, a trend begun by BHP Billiton and Kingfisher, according to F&C.

These schemes involve long-term bonus awards that are dependent on the initial achievement of short-term targets. The danger with the schemes is that they encourage management to adopt short-term business strategies.

F&C abstained against Allied Domecq on this basis and voted against Compass, BOC and Imperial Tobacco. Euromoney's remuneration package was also voted against because payments are based on a straight percentage of profits and have no cap on the upside. The management changes at WH Smith, where Kate Swann took over from Richard Handover, prompting payments for the outgoing and incoming chief executive, also raised the ire of F&C as did Enodis, where management pay schemes included what F&C deemed as "excessive" change of control payments.

Comments