It’s billed as a world first: Today the Investment Association has named and shamed 143 UK listed companies that endured shareholder rebellions of at least 20 per cent in the last year.
That amounts to more than a fifth of the constituents of the FTSE All Share Index finding themselves corporate naughty step, including some very big names. Corporate aristocracy such as WPP, BT, Morrisons AstraZeneca, Thomas Cook, HSBC, Reckitt Benckiser, Ladbrokes, Man Group, Pearson, William Hill, Foxtons, Balfour Beatty, Sports Direct and Sky are all there.
The creation of the register is a key plank in the Government’s package of corporate governance reforms, driven largely by outrage over bosses pay.
I was sceptical of the policy at first, but a perusal of the list shows that it has value.
It illustrates, for example, that there have been a surprisingly large number of revolts over the re-election of directors. In addition to high profile and widely reported cases, such as the unhappiness over the positions of James Murdoch as chairman of Sky and Keith Hellawell in the same role at Sports Direct, investment trusts, used by many small savers, are also well represented. This indicates that there may be a problem with the sector that isn’t being widely reported.
There are also some welcome instances where investors have taken issue with the reappointment of auditors. Mitie, the outsourcing company gets one of its entries for that reason. The problems it has been having with its accounts are well known. However, that's not the case with the similarly featured Harbourquest Global Private Equity.
But for as much good as the list does – and credit is due to the Investment Association for taking on the job – there is one notable omission that exposes the policy’s key flaw.
You may remember that last week housebuilder Persimmon Homes lost its chairman and its senior independent director amid uproar over a truly grotesque remuneration scheme that will see 150 top bosses sharing in a staggering £600m, with over £100m going to CEO Jeffrey Fairburn alone. He is one of the fattest of fat cats that this country has witnessed.
Yet Persimmon is absent from the list.
When it held its AGM on April 27 just 9.7 per cent of shareholders voted against in the advisory poll on the company’s remuneration report.
Persimmon also held a vote on its remuneration policy. That one carried real teeth. A rejection would have forced its remuneration committee back to the drawing board. However, just 3.24 of shareholders chose to bite as well as bark.
Neither no vote breached the 20 per cent threshold and so this most shameful instance of corporate bad behaviour over pay is going unnamed, at least as far as the list is concerned.
As much as companies, and their directors, should take its existence as an opportunity to reflect on their behaviour, and on their need to listen when they hold conversations with their big institutional shareholders, those investors also need to wake up their own responsibilities.
Pay schemes like the one operated by Persimmon, which has grown fat off the Government’s Help to Buy Scheme as much as anything its management has done, cannot be in shareholders' interests, least of all the people who pay the institutions to manage their money for them.
If institutions continue to let companies like it off the hook the list will fail, and nothing will change. Perhaps we should consider how to construct an investor naughty list too?
