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Investor rebellion over executive pay gathers pace | Investor rebellion over executive pay gathers pace |
(35 minutes later) | |
A shareholder rebellion over excessive executive pay has gathered pace with Weir Group, Shire, Standard Chartered and Reckitt Benckiser all targeted by investors. | A shareholder rebellion over excessive executive pay has gathered pace with Weir Group, Shire, Standard Chartered and Reckitt Benckiser all targeted by investors. |
At the annual meeting of engineering firm Weir Group, a proposed pay policy was rejected by 72% of shareholders. | At the annual meeting of engineering firm Weir Group, a proposed pay policy was rejected by 72% of shareholders. |
The company says it will discuss alternative options with shareholders. | The company says it will discuss alternative options with shareholders. |
At drugs maker Shire, 49% of investors voted against a 25% pay increase for chief executive Flemming Ornskov. | At drugs maker Shire, 49% of investors voted against a 25% pay increase for chief executive Flemming Ornskov. |
Every three years shareholders receive a chance to vote on the way the formula for executive pay is constructed. | |
That vote is binding, so the board needs a majority of shareholders to vote in favour. | |
So, in the case of Weir, the board of directors will have to come up with a new plan. | |
Votes between these three-year cycles are not binding, but can create embarrassment for the boss and the board of directors, as in the case of Shire. | |
Shire rejection | |
Fund manager Hermes advised shareholders to vote against Shire's remuneration plan at the annual meeting in Dublin. | Fund manager Hermes advised shareholders to vote against Shire's remuneration plan at the annual meeting in Dublin. |
"We do not support the increase in salary of 25% for the CEO (chief executive), particularly given that his overall bonus potential is more than 10 times his basic salary and his total remuneration was over $21m last year," said Hans-Christoph Hirt, co-head of Hermes equity ownership. | "We do not support the increase in salary of 25% for the CEO (chief executive), particularly given that his overall bonus potential is more than 10 times his basic salary and his total remuneration was over $21m last year," said Hans-Christoph Hirt, co-head of Hermes equity ownership. |
"We believe that an incremental approach to salary rises is more appropriate and should reflect shareholder value creation over the longer term," he added. | "We believe that an incremental approach to salary rises is more appropriate and should reflect shareholder value creation over the longer term," he added. |
Meanwhile, Royal London Asset Management said on Thursday it would vote against the 2015 remuneration reports at Standard Chartered and Reckitt Benckiser, the owner of Dettol, Scholl and Nurofen. | Meanwhile, Royal London Asset Management said on Thursday it would vote against the 2015 remuneration reports at Standard Chartered and Reckitt Benckiser, the owner of Dettol, Scholl and Nurofen. |
'Not embarrassed' | 'Not embarrassed' |
Earlier, WPP chief executive Sir Martin Sorrell was forced to defend his pay package, worth up to £70m. | Earlier, WPP chief executive Sir Martin Sorrell was forced to defend his pay package, worth up to £70m. |
He said his pay was based on the performance of WPP, the world's largest advertising group. | He said his pay was based on the performance of WPP, the world's largest advertising group. |
Sir Martin told BBC Radio 4's Today programme: "I'm not embarrassed about the growth of the company from two people in one room in Lincoln's Inn Fields in 1985 to 190,000 people in 112 countries and a leadership position in our industry, which I think is important." | Sir Martin told BBC Radio 4's Today programme: "I'm not embarrassed about the growth of the company from two people in one room in Lincoln's Inn Fields in 1985 to 190,000 people in 112 countries and a leadership position in our industry, which I think is important." |
Profile: Sir Martin Sorrell | Profile: Sir Martin Sorrell |
'Out of hand' | 'Out of hand' |
Last month 59% of BP shareholders voted against a 20% pay rise for chief executive Bob Dudley, that would have netted him £14m. | Last month 59% of BP shareholders voted against a 20% pay rise for chief executive Bob Dudley, that would have netted him £14m. |
The vote against the increase was non-binding, but BP's chairman said at the annual meeting that the sentiment would be reflected in future pay deals. | The vote against the increase was non-binding, but BP's chairman said at the annual meeting that the sentiment would be reflected in future pay deals. |
That was a "remarkable" moment according to Stefan Stern, a director at the High Pay Centre, a think tank which monitors executive salaries. | That was a "remarkable" moment according to Stefan Stern, a director at the High Pay Centre, a think tank which monitors executive salaries. |
"I do think there is a feeling that things have been getting out of hand," he said. | "I do think there is a feeling that things have been getting out of hand," he said. |
"Shareholders have signed off on pay structures they didn't understand and now we're seeing buyer's remorse," he added. | "Shareholders have signed off on pay structures they didn't understand and now we're seeing buyer's remorse," he added. |
'Not fit' | 'Not fit' |
Last week a group that includes some of Britain's most high-profile bosses said that executive pay in the UK is "not fit for purpose" and needs reform. | Last week a group that includes some of Britain's most high-profile bosses said that executive pay in the UK is "not fit for purpose" and needs reform. |
The Executive Remuneration Working Group said there was "widespread scepticism and loss of public confidence" over executive pay. | The Executive Remuneration Working Group said there was "widespread scepticism and loss of public confidence" over executive pay. |
Sainsbury's chairman David Tyler and Legal & General chief executive Nigel Wilson worked on the interim report. | Sainsbury's chairman David Tyler and Legal & General chief executive Nigel Wilson worked on the interim report. |
Also last week, Anglo American said it would be "mindful" of concerns about executive pay after more than two fifths of investors voted against a remuneration deal that included £3.4m for chief executive Mark Cutifani. | Also last week, Anglo American said it would be "mindful" of concerns about executive pay after more than two fifths of investors voted against a remuneration deal that included £3.4m for chief executive Mark Cutifani. |