Top bosses at listed firms warned to ex­pect pay re­volt by an­gry in­vestors

Belfast Telegraph - Business Telegraph - - Platform - BY BEN WOODS

HIGHLY-PAID bosses should brace them­selves for more in­vestor re­bel­lions over pay as share­hold­ers gear up for a scrap, a fund man­ager has warned.

Colin Mclean, man­ag­ing di­rec­tor of SVM As­set Man­age­ment, said in­vestor anger over hefty fi­nan­cial re­wards will come to a head this year, as nearly half of FTSE 100 firms face bind­ing votes on pay.

Ex­ec­u­tive pay lev­els have tre­bled since the mil­len­nium, de­spite ev­i­dence sug­gest­ing there is no strong link between com­pany per­for­mance and large ex­ec­u­tive pay pack­ets, Mr Mclean added.

“2017 could fi­nally be a year for change in ex­ec­u­tive pay, with both in­vestors and politi­cians ready for a fight,” he said. “Some long-term in­cen­tives were put in place be­fore the 2012 re­forms, with bind­ing share­holder votes only re­quired every three years.

“This year al­most half the FTSE 100 face bind­ing votes on pay, and we will see changes bite. The share­holder re­volt seems less likely to fiz­zle out this time.” It comes as David Cum­ming, head of eq­ui­ties at Stan­dard Life, told the BBC his firm “could not jus­tify” ex­ec­u­tive pay go­ing any higher.

“We con­tinue to see too many pro­pos­als that would bring a sub­stan­tial in­crease (in pay), and we have to sig­nal that we are not happy with that.”

Pay for the FTSE 100 chief ex­ec­u­tives has risen from an av­er­age of £1m in 1998 to £4.3m in 2015, far out­strip­ping the growth in av­er­age earn­ings. A group of fund man­agers are un­der­stood to have agreed to work to­gether to tackle ex­ces­sive ex­ec­u­tive pay dur­ing a meet­ing last month.

Aberdeen As­set Man­age­ment, In­vestec As­set Man­age­ment, Stan­dard Life In­vest­ments and M&G In­vest­ments are said to be among the 13 firms join­ing forces to ad­dress the is­sue.

Prime Min­is­ter Theresa May out­lined plans to shake up cor­po­rate pay in a green pa­per last Novem­ber.

Among the changes, com­pa­nies will have to pub­lish pay ra­tios that show the dif­fer­ence in earn­ing between the chief ex­ec­u­tive and av­er­age em­ployee.

Mr Mclean said “poorly thought out re­wards” had the po­ten­tial to “de­stroy cor­po­rate value”.

“Most in­cen­tive schemes re­main rel­a­tively short term, with poor link­age to share­hold­ers’ long term in­ter­ests or sus­tain­able re­turns.”

Last year saw a string of share­holder re­volts at AGMS, as in­vestors took um­brage with re­mu­ner­a­tion awards doled out to top bosses.

Votes warn­ing: Colin Mclean

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