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Pirc signals new wave of shareholder rebellions Pirc signals new wave of shareholder rebellions
(7 months later)
A leading shareholder advisory body has signalled a new wave of rebellions over boardroom pay by recommending its clients vote against every new long-term bonus plan published this year.A leading shareholder advisory body has signalled a new wave of rebellions over boardroom pay by recommending its clients vote against every new long-term bonus plan published this year.
Pirc, which advises pension funds and local authorities, has concluded that as all long-term incentive plans (Ltips) are "fundamentally flawed" it will not support any new ones put to a shareholder vote in 2013.Pirc, which advises pension funds and local authorities, has concluded that as all long-term incentive plans (Ltips) are "fundamentally flawed" it will not support any new ones put to a shareholder vote in 2013.
The plans pay out in shares and can inflate bosses' pay by as much as five times.The plans pay out in shares and can inflate bosses' pay by as much as five times.
The advisory body intends to get "tough on Ltips and tough on the causes of Ltips" by cracking down on the remuneration consultants which advise companies on the pay of boardroom bosses.The advisory body intends to get "tough on Ltips and tough on the causes of Ltips" by cracking down on the remuneration consultants which advise companies on the pay of boardroom bosses.
Alan MacDougall, managing director of Pirc, said: "Our conclusion regarding Ltips is simple: they are not long term and they do not incentivise. They are also ineffective due to amendments and manipulation by remuneration committees. We believe that superficial reform, trying to redesign the same flawed model, is not good enough. So we're taking the radical step of opposing all new Ltips."Alan MacDougall, managing director of Pirc, said: "Our conclusion regarding Ltips is simple: they are not long term and they do not incentivise. They are also ineffective due to amendments and manipulation by remuneration committees. We believe that superficial reform, trying to redesign the same flawed model, is not good enough. So we're taking the radical step of opposing all new Ltips."
Ltips are the third component of pay deals of top executives after a salary and an annual bonuses. They typically pay out after three years and are linked to performance criteria. When companies put new schemes together for their bosses they are put to a shareholder vote in addition to the remuneration report.Ltips are the third component of pay deals of top executives after a salary and an annual bonuses. They typically pay out after three years and are linked to performance criteria. When companies put new schemes together for their bosses they are put to a shareholder vote in addition to the remuneration report.
The decision by Pirc to step up its opposition to executive pay follows last year's so-called shareholder spring when a wave of major companies suffered defeats over their pay policies, including media company WPP and insurance company Aviva. Investors are waiting to find out if companies heeded their rebellions in 2012 and will now be more willing to show a link to executive pay and a company's performance.The decision by Pirc to step up its opposition to executive pay follows last year's so-called shareholder spring when a wave of major companies suffered defeats over their pay policies, including media company WPP and insurance company Aviva. Investors are waiting to find out if companies heeded their rebellions in 2012 and will now be more willing to show a link to executive pay and a company's performance.
Pirc intends to take on the remuneration consultants by recommending that a company's report and accounts should not supported if the company used the same firm as its auditors. Pirc will also not support the re-election of the director chairing the remuneration committee and audit committee for the same reason.Pirc intends to take on the remuneration consultants by recommending that a company's report and accounts should not supported if the company used the same firm as its auditors. Pirc will also not support the re-election of the director chairing the remuneration committee and audit committee for the same reason.
The shareholder advisory body is also keeping up the pressure on accounting rules which it is concerned allow companies to distort the value of its assets. Where it believes using the IFRS international accounting rules has had this effect it will not support the election of the finance director as well as the company's report and account.The shareholder advisory body is also keeping up the pressure on accounting rules which it is concerned allow companies to distort the value of its assets. Where it believes using the IFRS international accounting rules has had this effect it will not support the election of the finance director as well as the company's report and account.
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