The 2016 AGM season in the UK 
was widely expected to be a continuance of the relatively calm landscape of the previous three years, with the shareholder spring of 2012 confined to memory and the regulatory environment largely unchanged from the previous year. While such prophecies largely held true for the election of directors—save for some noteworthy exceptions surrounding specific independence concerns—pay packages at UK issuers once again emerged as flashpoints that will define the 2016 AGM season.
Throughout the period spanning April to June, investors at a range of companies appeared to say enough is enough on the pay front, with four FTSE 350 companies suffering relatively embarrassing defeats at the hands of their shareholders, while a spate of others were subject to sizable investor revolts. The timing of the latest round of shareholder rebellions at FTSE issuers appears significant, with the majority of companies due to return to shareholders to renew forward-looking, three-year remuneration policies at their 2017 AGMs.
Out of the hundreds of AGMs we covered during the season, our review provides a handful of Case Studies that illustrate the issues that investors and companies faced within the UK market, and what both parties can learn from them, including:
- Schroders – the curious case of the venerable asset manager’s continued failure to meet boardroom best practice, and the mooted minority shareholder revolt that never happened.
- Rolls-Royce – one year after Alliance Trust was rocked by a contentious proxy battle, Rolls-Royce’s no-fuss, no-mess concession to ValueAct shows that UK companies may be getting the hang of U.S.-style activism.
- Kingfisher & Weir Group – two attempts at implementing unusual new pay structures (one successful, the other… not) demonstrate that companies wishing to venture outside the norm should be prepared to talk—and listen—to their shareholders before going to a vote.
- BP – long a dirty word in UK pay, discretion may be making a comeback as shareholders take issue with formulaic payouts that fail to reflect overall company performance.
Perhaps shareholders were seeking to remind companies this year that pay practices remain under intense scrutiny, and increased engagement with disgruntled shareholders in the coming months may be extremely important to ensuring that further embarrassment is avoided as we enter 2017 with companies seeking approval of their forward-looking, three-year remuneration policies.
Indeed analysts at Glass Lewis have been busy with their own engagement in the UK since the end of the 2016 season with a broad range of companies over the last fortnight including BP, Royal Dutch Shell, Pearson, London Stock Exchange, HSBC, Barclays, Schroders, Ashmore Group, Diageo, Smith & Nephew, Shaftesbury, Daejan, Elementis and BAE Systems; along with bodies such as the FRC, ICSA and GC100.
As always, if your company would like to engage with our analysts, please send us an invitation from the Issuer section of our website.
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Glass Lewis’ season reviews provide market-specific overviews of the key developments in governance, shareholder activism and stewardship, executive compensation and ESG that defined the 2016 proxy season, along with in-depth case studies detailing how these issues played out in practice.