Shareholder rebellions see top firms rein in executive pay

Britain's biggest listed firms have started to rein in ballooning executive pay after being hit by a string of shareholder rebellions.

Fresh data from the Investment Association shows FTSE 100 companies have "listened and acted" to shareholder concerns, issuing "more conservative" policies for their executive teams in 2017.

The move resulted in a 35% drop in the number of remuneration proposals that saw more than 20% of shareholder votes cast in opposition to those resolutions, compared to 2016.

Investment Association chief executive Chris Cummings said: "Data from the 2017 AGM season shows that investors are flexing their muscles and holding big business to account.

"Executive pay amongst the UK's largest companies is starting to decline to a level more in line with shareholder expectations."

Data released by the High Pay Centre think tank and the Chartered Institute of Personnel and Development (CIPD) earlier this year found that the pay packages for FTSE 100 chiefs was already falling last year, averaging £4.5 million, down from £5.4 million in 2015.

Shareholder revolts swept FTSE 100 firms in 2016, when the bosses of mining giant Anglo American, advertising behemoth WPP and oil major BP all faced investor backlash over swelling pay.

Nearly 60% of BP shareholders voted against a 20% hike in Bob Dudley's pay at the oil giant's 2016 AGM after the group posted its largest annual loss for at least 20 years and axed thousands of jobs worldwide.

BP subsequently slashed Mr Dudley's pay package by 40% and his maximum earnings by 3.7 million US dollars (£3 million) over the next three years in hopes of seeing off a fresh shareholder rebellion.

The move proved popular among investors, who approved the resolution by over 97% earlier this year.

Likewise, Imperial Brands - the company behind Davidoff and Lambert and Butler cigarettes - also moved to stub out a potential shareholder rebellion by withdrawing plans for a bumper pay rise for chief executive Alison Cooper.

But other firms like luxury retailer Burberry have charged on with growing pay, prompting nearly a third of shareholders to vote against a generous payouts that include a £5.4 million share award for former boss Christopher Bailey.

Pearson shareholders also vented their anger, with more than 60% of votes cast against a 20% pay bump for the loss-making publisher's chief executive John Fallon.

The Investment Association's study also found that FTSE 250 companies failed to calm shareholder fury over pay this year, resulting in a 100% jump in companies seeing 20% of votes cast against their remuneration resolutions this year, while FTSE 350 firms suffered a 400% jump in votes against re-electing company directors.

"There is still some way to go, but a strong signal has been sent to boardrooms around the country that investors won't tolerate rewards that are out of line with company performance and have concerns about executives' spiralling pay," Mr Cummings said.

"Well-run and well-performing companies that yield long-term shareholder returns are critical to ensuring that British savers and pensioners are able to lead more prosperous lives into their later years."