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Governance

U.K. companies put executive pay more in line with investor expectations – analysis

The U.K.'s largest listed companies have listened and acted on "investor rebellions" in 2016, shows analysis by the Investment Association of the 2017 annual general meeting season voting data.

The IA, whose members collectively manage about 5.7 trillion ($7.4 trillion) in assets under management, said investors are effectively holding FTSE 100 and FTSE 250 companies and their individual directors to account for issues, executive pay in particular.

Analysis of data collected between January and July, covering 267 annual general meetings from FTSE 350 companies, show the number of FTSE 100 company remuneration resolutions that received more than 20% dissent fell 35% compared with 2016 figures, down to nine "rebellions." The IA said in a statement accompanying the data that many FTSE 100 firms that saw large shareholder votes against pay in 2016 "have on the whole submitted more conservative pay policies in 2017 for their executive teams, which were more in line with shareholder expectations."

For the FTSE 250 however, the IA found a 93% increase in the number of companies receiving 20% or more votes against their remuneration resolutions vs. 2016, at 29 companies.

The association also said six FTSE 350 firms withdrew resolutions on remuneration ahead of company annual shareholder meetings, in order to avoid a shareholder rebellion.

The IA also considered votes against the re-election of a director, and found a 400% increase for FTSE 350 companies.

Individual directors also received more scrutiny at 2017 annual general meetings, with a 525% increase in votes cast against them. The IA said 21 directors faced 20% or more votes against them.

"Data from the 2017 AGM season shows investors are flexing their muscles and holding big business to account," said Chris Cummings, CEO of the Investment Association, in the statement. "Executive pay amongst the U.K.'s largest companies is starting to decline to a level more in line with shareholder expectations. 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' spiraling pay.

"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," added Mr. Cummings.