The number of pay resolutions at annual meetings where at least 20 per cent of shareholders voted against fell to 12.5 per cent in the year to June 2020, compared with 14 per cent in the previous year, according to Proxy Insight, the data provider.
Matt Scott, vice-president at Insightia, Proxy Insight’s parent company, said the fall in shareholder revolts was “perhaps surprising, given Covid-19 prompted extra scrutiny of executives’ pay packets this year”.
However, he warned that attention could increase next year, with investors giving companies some breathing space to deal with the pandemic.
“It might be that investors are taking the time to fully understand companies’ responses to the pandemic before they take voting action. Given the backwards-looking nature of advisory votes, opposition may yet materialise next year,” he added.
As the pandemic unfolded, companies came under political, societal and shareholder pressure to ensure bosses were sharing the pain of the pandemic, particularly if they furloughed employees or cut dividends.
In one case, Pensions Investment Research Consultants, an adviser to shareholders including the UK’s local authority pension funds, which oversee £300bn in assets, wrote to 4,000 listed companies around the world. It called on the companies to take a tough approach to pay given the disruption caused by the pandemic.
In response to the intense pressure, companies announced that executives would take temporary pay cuts. Analysis by the FT, however, found that many UK companies that had cut wages in the early part of the lockdown had reverted to full pay by the summer.
Separate research from Georgeson, a corporate governance consultancy, found that businesses in Spain, Italy, the Netherlands and the UK were more likely to cut dividends than executive pay this year.
The Proxy Insight data also shows that the number of pay resolutions where at least half of investors voted against fell to 1.8 per cent, compared with 2.1 per cent in 2019.
Sebastien Thevoux-Chabuel, a portfolio manager at Comgest, said many AGMs “were held at a time where we were flying blind with regards to the consequences of the pandemic”.
“As most companies were showing a sense of restraint and of solidarity, many shareholders were reluctant to sanction management teams at a time of great stress for these organisations,” he said.
Another big investor agreed that many companies took “prudent” action by slashing executive pay. He said that for this reason, it was a “mild” annual meeting season.
But he expected remuneration to be a big focus for shareholders over the coming months. This is because pay is typically backward looking, with 2020’s pay packages including bonuses, being voted on in 2021.
“I really believe 2021 will be the season where there will be a lot more debate and discussion [on executive pay],” he said.
While overall rebellions were down, the Proxy Insight report found that some investors, including M&G, Royal London Asset Management and Axa Investment Managers, as well as big pension funds including Calstrs and New York State Teachers’ Retirement System, supported fewer pay resolutions this year.
The report also found that shareholder support for resolutions on diversity and employment as well as environmental policies and reports increased in 2020.