Threefold rise in FTSE 100 firms that let investors vote on directors' pay

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The Independent Online

Nearly four in 10 companies in the FTSE 100 intend to put their boardroom pay arrangements to a shareholder vote this year – a threefold increase on the previous year – according to a study released yesterday.

Nearly four in 10 companies in the FTSE 100 intend to put their boardroom pay arrangements to a shareholder vote this year – a threefold increase on the previous year – according to a study released yesterday.

The report also found that the directors of some blue-chip companies could face civil actions and heavy fines for failing to get prior shareholder approval to make political donations.

The rise in the number of FTSE 100 companies giving investors a say in the remuneration of directors comes as the Government prepares to introduce legislation making such votes mandatory although still "advisory" at annual general meetings.

From next year, companies must also include in their annual directors' remuneration report, a performance graph showing how well the business has fared against its peers, a statement on whether the report of the remuneration committee was accepted without amendment and the names of any advisers used by the committee.

The survey, by the company secretarial consultants Edis-Bates Associates*, found that 37 per cent of FTSE 100 companies planned to offer a vote this year compared with 13 per cent last year. Jon Edis-Bates, the author of the survey, said the proportion this year could turn out to be even higher as companies prepared themselves for the new legislation.

However, the survey also found that only 11 per cent of companies planned to provide performance graphs in their annual reports although 91 per cent said they would disclose the performance criteria on which pay awards were based.

The survey also found that the proportion of companies seeking shareholder approval to make political donations is set to rise from 15 per cent in 2001 to 37 per cent this year. This is despite the fact no FTSE 100 companies actually made donations last year and few, if any, are expected to this year.

Mr Edis-Bates said many companies may be breaking the law by not gaining prior approval. In that case, the directors involved must pay back the amount of the "donation" to the company plus interest.

* Directions: Corporate Governance Issues 2002. £85 jon@edis-bates.co.uk

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