2015 AGM season: Fewer headlines but major issues still remain, says NAPF

The NAPF has published its third Annual General Meeting (AGM) Season Report. In general terms this year has seen much more purposeful and effective engagement between companies and investors – but there remained a number of exceptions and this year’s report highlights three areas to note:

• 12 companies within the FTSE 350 where shareholders have for a successive year expressed discontent with particular governance arrangements;
• The top five  FTSE 100 and top ten FTSE 250 shareholder rebellions on executive pay; and
• 17 companies in the FTSE 350 where re-election of individual directors drew shareholder dissent of more than 15%.

Governance arrangements

Will Pomroy, Policy Lead: Corporate Governance & Stewardship, NAPF, commented:

“A quick look at 2015 might suggest it was a relatively quiet year on the corporate governance front. Limited regulatory changes and a General Election resulted in fewer corporate governance headlines. That said, the increased focus on corporate governance is here to stay and there have been some notable moments this season:  there were three shareholders’ resolutions at large UK companies and these are an uncommon occurrence in the UK, and elsewhere there were significant rebellions at approximately 20% of FTSE 100 and FTSE 250 companies.” 

Executive remuneration

Will Pomroy, Policy Lead: Corporate Governance & Stewardship, NAPF, commented:

“As ever, the issue of executive pay continues to attract a great deal of attention  and often acts as a lightning rod or proxy for other wider governance concerns. 

“In the current economic environment it is encouraging to see that some restraint on pay has continued this year with a third of CEO salaries being frozen, bonus opportunities and awards remaining static and LTIP opportunities and awards increasing only slightly. That said, we continue to believe that too many remuneration structures are unnecessarily complex and in many cases there remains insufficient transparency around bonus targets, which is frustrating and doesn’t help build confidence in the outcomes.”

Individual directors

Will Pomroy, Policy Lead: Corporate Governance & Stewardship, NAPF, commented:

“The NAPF Corporate Governance Policy places particular emphasis on the importance of individual responsibility and consequently the role of shareholders in holding to account the individuals they have elected to the board.  This becomes of special importance when voting on the re-election of directors.  Given the increased emphasis in recent years on this area we have chosen to highlight in our report instances where a director seeking re-election received greater than 15% dissent. 

“Our policy for 2014 / 2015 for the first time also encouraged investors to consider two aspects in particular when voting on the re-election of directors:  the quality and the availability of directors.  While engagement is evidently crucial in forming these judgements it is equally evident that in the absence of this shareholders understandably continue to draw on other information to inform their judgement of the director’s effectiveness, such as the individual’s record of attendance at board meetings and specific aspects of corporate reporting.”

A copy of the NAPF 2015 AGM Season Report can be found on the NAPF website here.