Shareholder opposition to executive pay proposals is expected to hit a peak during 2013 and 2014 as a growing number of long-term incentive plans come up for renewal.
According to a report by KPMG, the so-called 2012 “shareholder spring” was, in fact “something of an illusion”, even though 10 “serious” revolts over the renumeration packages of FTSE 100 company bosses led to the impression that a new era had dawned due to the amount of media attention gained.
A revolt is considered serious if more than 20% of shareholders abstain or vote against a pay proposal at an annual general meeting.
Such a situation at firms such as Aviva, Trinity Mirror and Barclays due to deep unhappiness over pay levels had pushed the issue centre stage and led to a number of high profile resignations. But the number of such serious revolts fell from 34 in 2011.
The issue also gained in profile after business secretary, Vince Cable, announced plans to force companies to have binding votes on executive pay every three years.
Employers will likewise be required to publish a simple figure each year indicating how much senior managers have been paid as well as an exit payment, showing how much they gained on resigning or being sacked.
Although FTSE 250 firms saw a higher number of revolts overall, the figures still only rose by five on the previous year to 29, however.
But David Ellis, head of the reward at the management consultancy, predicted that a much bigger backlash was likely over the next couple of years.
“It is our view that the flexing of shareholder muscle in 2012 may well be a rehearsal for what is to come,” he said. “For example, the last few years has seen only a relatively small number of new long-term incentive plans being proposed to shareholders.”
A number of companies had clearly been waiting to understand the economic and regulatory landscape better before formulating new plans and consulting with shareholders, Ellis added.
“Next year and in 2014, we expect the number of plans proposed to increase significantly and for shareholders to view such requests for approval very carefully,” he warned.
