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Stewardship in 2012

Stewardship in 2012. Introduction. Presentation to: Suffolk County Council, 25 th July 2012 Presentation from: Tom Powdrill, Head of Communications Regulated by the FSA. Agenda. Church Investors Group: Stewardship in 2012. Agenda Key points.

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Stewardship in 2012

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  1. Stewardship in 2012

  2. Introduction Presentation to:Suffolk County Council, 25th July 2012 Presentation from:Tom Powdrill, Head of Communications Regulated by the FSA Suffolk County Council: Stewardship in 2012

  3. Agenda Church Investors Group: Stewardship in 2012

  4. AgendaKey points • The ‘Shareholder spring’: A season of revolts over top pay and other governance concerns. • New shareholder powers: BIS has set out some new reforms for tackling executive pay. • Voting disclosure: Increasing expectations of accountability on the part of shareholders. • The Kay Review: Report of the review into UK equity markets and long-term decision making. Suffolk County Council: Stewardship in 2012

  5. Developments in stewardshipShareholder opposition to top pay • A renewed wave of pressure: We estimate that the level of shareholder opposition to remuneration reports is up 50%. • A record year: WPP’s defeat last week makes six in total for 2012 so far. The previous highest was five in 2009. • Widespread support: There is a general consensus that shareholder activism on top pay is a good thing. • Concerns about performance: Big votes against Barclays, Trinity Mirror and Aviva reflected shareholder concern about the mismatch between pay and performance. • Concerns about quantum: This season shareholders seem to be willing to oppose remuneration policies on the basis that directors are receiving too much. • Political pressure: Shareholders feel obliged to be seen to act? Suffolk County Council: Stewardship in 2012

  6. Developments in stewardshipAverage votes against remuneration reports Average oppose vote: 9% Median oppose vote: 4% Suffolk County Council: Stewardship in 2012

  7. Developments in stewardshipRange of votes against remuneration reports Suffolk County Council: Stewardship in 2012

  8. Developments in stewardshipRange of votes against remuneration reports Suffolk County Council: Stewardship in 2012

  9. Developments in stewardshipBig votes against pay this season Suffolk County Council: Stewardship in 2012

  10. Developments in stewardshipChief executives forced out Suffolk County Council: Stewardship in 2012

  11. Developments in stewardshipSilent assassins? Vote against: 0.08% Vote against: 4.6% Vote against: 14.6% Suffolk County Council: Stewardship in 2012

  12. Developments in stewardshipVoting on director elections Suffolk County Council: Stewardship in 2012

  13. Developments in stewardshipBIS strengthens shareholder powers on pay • A binding vote: A new forward-looking vote on pay policy that will be binding on the company if defeated. It will be an annual vote, unless companies commit to a three year policy. • Advisory vote: The existing advisory vote remains and will be focused on implementation of remuneration policy. • Exit payments: The company must set out its position in the remuneration policy, which will bind the company. • Vote thresholds: A simple majority on both votes, but if a company receives substantial minority opposition they should issue a statement . The Govt had floated a higher threshold. • What we think: The binding vote will certainly give shareholders more power, but will they use it? Also the retreat on thresholds could mean only a handful of companies face serious pressure. Suffolk County Council: Stewardship in 2012

  14. Developments in stewardshipDisclosure of voting records • Shareholder accountability: PIRC believes that public disclosure makes those exercising economic power more accountable. • Current position: It remains voluntary for shareholders whether to disclose their record or not. • Best practice: Stewardship Code says investors should disclose, ISC issued a ‘framework document’ in 2007. • Current practice: Many of the larger asset managers disclose, though in different formats, but the majority of Stewardship Code signatories do not. • Kay Review: May say something on voting disclosure? Suffolk County Council: Stewardship in 2012

  15. Developments in stewardshipDisclosure of voting records ISC framework published Stewardship Code goes live Suffolk County Council: Stewardship in 2012

  16. Developments in stewardshipDisclosure of voting records Suffolk County Council: Stewardship in 2012

  17. Developments in stewardshipWhat disclosure of voting records shows Asset manager votes on FTSE100 remuneration reports in 2011 Suffolk County Council: Stewardship in 2012

  18. Developments in stewardshipThe Kay Review • The review’s principal focus is to ask how well equity markets are achieving their core purposes: • to enhance the performance of UK companies; • to enable investors to benefit from this in the form of returns. • It is considering: • whether market participants are excessively short-termist • if so, what actions might be taken to address this. • It is examining the incentives, motivations and timescales of all participants in the equity markets – from end investors, through pension funds, advisers, fund managers, and the markets, to company boards – and the relationships between them. Suffolk County Council: Stewardship in 2012

  19. Further information Suffolk County Council: Stewardship in 2012

  20. Contactwww.pirc.co.uk Tom PowdrillHead of CommunicationsEmail: tomp@pirc.co.ukTelephone: +44 20 7392 7887 Regulated by the FSA Suffolk County Council: Stewardship in 2012

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