United won approval of new remuneration packages for its directors at last month's annual general meeting, but only after fending off high-profile criticism from some leading shareholders.
Less than 30 per cent of its shareholders voted in favour of the pay packages. However, due to the high level of abstentions, that was sufficient to carry the day for the new arrangements, which involved big increases in base salaries and the prospect of big bonuses.
Many institutions did not oppose the increases because it is not their policy to intervene on the specifics of pay, providing they are set in accordance with general principles such as linkage with performance.
However, big investors have become increasingly conscious of the importance to the share price of how companies manage external relations with the media, regulators and politicians.
The issue is most acute among the privatised utilities, which have attracted a barrage of criticism from the media over executive pay. Such controversy can influence public opinion, which can have a bearing on the attitude of politicians and the regulator.
Some investors have questioned privately whether Ofgas would have taken such a tough line with British Gas if the company's reputation had not been so badly tarnished over the pay rise awarded to its former chief executive, Cedric Brown.
They also point to the threat of a windfall tax by a new Labour government, which they fear could be targeted at the companies with the poorest public image.
"Management of political and regulatory risk is a key part of the job of a privatised utility's board," one investor said.
"We will certainly be raising United Utilities' handling of the pay issue when we meet with them."Reuse content