TUC: manager voting survey indicates shareholders “not doing their job properly”

Challenge comes as UK government reiterates exec pay legislation threat.

Institutional shareholders are failing to check the rise of executive pay at UK-listed banks, according to this year’s ninth annual fund manager voting survey by the Trades Union Congress (TUC). The challenge comes as UK Business Secretary Vince Cable stepped up the pressure this weekend for investors to intervene more firmly on executive pay. Speaking on television, Cable suggested regulation might be required if they didn’t: “(There) may be reforms they (shareholders) can undertake themselves. It may require pressure from outside in legislative form,” he said. The TUC looked at asset manager voting records on the remuneration reports of all five major UK-listed banks. It found that three of the five received the highest level of shareholder support in the survey of the voting records of 20 fund managers, pension funds and voting agencies across 69 company resolutions between January and December 2010. Barclays’ remuneration report, it said, was backed by 75% of respondents – the highest in the survey – despite controversy earlier this year when it revealed that chief executive Bob Diamond and the bank’s two investment banking heads were paid £28m in 2010 and also received shares worth £40m for past performance. TUC General Secretary, Brendan Barber, said: “The fact that UK bank remuneration reports received so much backing in the face of diminishing dividends and poor stock market performance is a clear sign that institutional investors are not doing their job properly. Reform of our corporate culture is long overdue and ministers need to take the lead in forcing throughchange, particularly on executive pay, where remuneration committees are frequently failing to act in a transparent and responsible manner.” Nonetheless, the TUC survey found that shareholders are getting tougher on remuneration reports more generally. It said pay was the issue over which respondents were most likely to oppose company management. Half of the survey respondents supported less than half of the remuneration reports on which votes were sought, and many supported less than a third. Remuneration was also the most common topic of corporate lobbying by shareholders. The number of institutional money managers disclosing their full voting records has also risen to 13 compared to nine in 2010. However, the TUC said the quality of information varied, with several fund managers only disclosing votes against and abstentions, and others only providing headline statistics. The TUC said several respondents said they had made the voting transparency changes as a result of the introduction of the Stewardship Code a year ago. But overall, the union body said it believed the code had had little effect on the voting stances taken by institutional investors and needed to be tougher. The UK government is currently reviewing proposals to clamp down on excessive executive pay with one suggestion being to give shareholders a binding annual vote. The TUC’s annual Pension Trustee Conference takes place in London on Tuesday November 14.
See downloadable documents (left hand column) to download TUC voting report