Investors increase shareholder activism

This year’s voting season has been one of the “most contentious ever” with shareholders expressing heightened levels of discontent over executive pay.

The phrase “Shareholder Spring” – coined in 2012 during a period of investor dissent at shareholder meetings – is reappearing as investors voted against executive pay resolutions at a succession of companies in Europe, particularly in the UK where shareholders have gained more influence over remuneration.

BMO Global Asset Management says “Shareholder Spring II” is a result of deteriorating corporate earnings, the shift in energy prices and continued sluggish economic outlook around the globe.

In a note, the firm says pay is at the top of shareholder grievances – but pay is not the sole issue behind this year’s dissent. Director elections and high levels of support for shareholder proposals at underperforming companies have also been prevalent topics.

The firm says it is not sure what impact Brexit may have on shareholder action.

“It is not yet clear whether uncertainty following the UK EU referendum outcome will influence investor voting patterns. Sustained levels of votes against management in July would herald a defining shift in investor attitudes towards executive pay.”

BMO Global AM expects scrutiny over executive pay to continue into 2017.

The tighter UK shareholder influence over pay stems from a Department for Business Innovation and Skills requirement post-2012 that companies seek binding shareholder approval for their remuneration policy at least once every three years.

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