Analysis: Investor protest votes on pay here to stay

Mon May 7, 2012 3:26pm EDT
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By Tom Bergin and Sinead Cruise

LONDON (Reuters) - Company directors will remain under pressure from shareholders over executive pay long after the market downturn ends and lawmakers stop the heckling that has helped prompt votes against remuneration policies at this year's annual meetings.

Investors and directors say the days of shareholders rubber-stamping company resolutions at Annual General Meetings (AGMs) is over and directors will have to get used to investors being more vocal on many areas of company business.

"Investors are getting more active, and not just the fringe activist type hedge funds but also mainstream investors. And I think that's quite a good sign," said DeAnne Julius, who sits on the board of Swiss drugmaker Roche and U.S. property group Jones Lang LaSalle.

"Boards have not really yet awoken to the amount of anger that there is out there," said Julius, who previously sat on the remuneration committees of oil giant BP and Britain's bank Lloyds bank.

The current Annual General Meeting (AGM) season has seen a series of blue chip European and U.S. companies receive bloody noses from investors voting against pay proposals.

Data from pay consultants PIRC show the average percentage of shareholders voting against remuneration reports has nearly doubled to 5.95 percent in 2011 from 3.28 percent in 2006.

The banking sector has felt the brunt hardest. Significant minorities of investors at Credit Suisse CSGN.VX, UBS and Barclays (BARC.L: Quote) voted against the companies' pay reports in advisory votes. At Citigroup (C.N: Quote) and UK insurer Aviva only a minority backed the plans.

Other sectors also felt shareholders' ire. Twelve percent of BP (BP.L: Quote) investors opposed its remuneration report, as did 39.7 percent of shareholders at British satellite company Inmarsat.   Continued...