Investor rebellion prompts action more than six months after AGM  
Thursday 14 Nov 2019 Author: Tom Sieber

The recent backtracking by emerging markets-focused bank Standard Chartered (STAN) on executive pay shows the impact shareholder pressure can have on this issue and puts the spotlight on other companies which have faced significant pay revolts.

Nearly 40% of the shareholder base failed to back the remuneration policy at Standard Chartered at its annual investor meeting in May. This followed a move by the bank to reduce chief executive Bill Winters’ and finance director Andy Halford’s pension allowances from 40% to 20% of their salary.

At first glance this seems counter-intuitive but changes to the definition of their pay meant the level of contributions to each executive’s respective retirement pot actually went up.

The episode illustrates the pressures that companies are under to maintain high levels of remuneration to retain and attract executive talent while addressing shareholder, political and regulatory pressure over levels of pay.

Ultimately Standard Chartered announced on 8 November that, while the wider definition of their remuneration will remain for now, the pension contributions for both Winters and Halford have been slashed in half to 10%, in line with other employees of the bank, with effect from 1 January 2020.

Standard Chartered is not alone; according to Deloitte around one in six FTSE 100 companies have reduced the pension provision for incumbent executive directors in 2019, all in cases where the provision was 25% of salary or more.

The overall trend for the AGM season was for a reduced level of shareholder opposition, particularly compared to 2018, though there have been some high profile exceptions – notably software firm Micro Focus (MCRO) lost a vote on remuneration.

On 6 November housebuilder Redrow (RDW) endured its own revolt on pay, with 30% opposition recorded at the AGM, which the company says was connected to the long term incentive plan (LTIP) award for 2020, and the LTIP payment made to Steve Morgan following his transition to a non-executive from an executive role in October 2017.

Meanwhile construction firm Kier (KIE), which has seen its market valuation collapse amid concerns over its financial position, could face significant shareholder opposition at its AGM on 15 November. Shareholder advisory groups ISS and Glass Lewis have both urged shareholders to vote against the pay policy.

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