This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

BP Remuneration Vote Lost

BP had 59% of shareholders voting AGAINST the Remuneration Resolution at their Annual General Meeting (AGM) on 14/4/2016 (and that’s ignoring the abstentions which some institutions like to use to express dissatisfaction).

This is what the Chairman had to say even before the vote was cast: “We know already from the proxies received and conversations with our institutional investors that there is real concern over the directors’ pay in this challenging year for our shareholders. We have always judged executive performance not on the price of oil or bottom line profit but on measures that are clearly within management’s control. And from that perspective the Board has concluded that it has been an outstanding year. The pay reflects this and it is consistent with our policy.”

But investors clearly thought that directors should suffer just as much as they themselves were from the disappearing profits. There were only 41% of votes cast in favour of the Remuneration Report according to Stan Grierson who was present at the meeting, although this is of course only an advisory vote. The full voting details will be issued later.

The press release issued by ShareSoc before the AGM is here: https://www.sharesoc.org/pr73bpremuneration.html

But it was not just ShareSoc who opposed it. Glass Lewis, PIRC and ISS also did so. The Chairman has promised to engage with shareholders so as to understand their concerns.

ShareSoc Chairman Designate Mark Northway gave an interview for BBC TV News just before the AGM. Here’s a few of his comments: “It’s an egregious result and it sends the wrong message [to investors, employees….]. It’s about leadership – the remuneration committee and the board should have exercised discretion.”.

ShareSoc Director Stan Grierson reports that it was a somewhat chaotic meeting and in his view badly chaired by Carl-Henric Svanberg. The Chair of the Remuneration Committee spent 20 minutes trying to justify the pay scheme to little effect. Stan gave an interview to Channel 4 News in which he said “It’s a PR disaster. The whole system in the UK, indeed in the world, needs to be changed. Senior people in the company must not set their own remuneration!”.

Comment: It is of course worth noting that the remuneration policy was approved by shareholders previously but with such complex pay schemes, the implications some years in the future of what they might pay out are sometimes not obvious. This is one result of having remuneration packages made up of a number of elements – base salary, bonuses and LTIPs where performance elements can be varied and confusing. Is it not time to revert to much simpler schemes?

These very complex packages are one reason why executive pay has been moving upwards by leaps and bounds even when real profits are not, and even though basic salaries are now more restrained. The general problem of grossly excessive pay remains – we have just issued another recommendation to oppose a vote on remuneration at Anglo American which is another example (see https://www.sharesoc.org/pr74angloamercian.html) . The voting arrangements introduced by Vince Cable may have helped, but reform of Remuneration Committees is surely also required if we are to put a lid on grossly excessive pay schemes.

Roger Lawson

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