The shareholder revolt at BP's AGM yesterday was a lot larger than I was expecting. If you include abstentions then 22% of the company's shareholders failed to back the remuneration policy. That might not sound that large, and obviously the company has won the vote. But it is a large anti vote in any proxy season, and for a company like BP it is a serious message from its owners. The Telegraph coverage of the AGM is pretty good.
What makes the large vote all the more surprising is that two of the main voting advisory services - RREV and the ABI's IVIS - actually gave the remuneration report the all clear. Only the firm I work for - PIRC - came out with a vote against. This suggests a number of things. One is that some large shareholders were influenced by PIRC's analysis and/or did not accept the line taken by IVIS or RREV. Also it's possible that US investors decided to give the company a kicking, afterall BP's big safety problems were in the US.
Overall it felt like there was a real turn in investor attitudes to BP's pay policy in recent weeks. Despite the respect that Lord Browne still commands in the City, there were genuinely serious issues at stake, so it is entirely right that a large block of shareholders voted the way they did.
The vote was also interesting because local authority pension funds, who own about 1% of the company, wanted to see more linkage between pay and management of safety. I am certain that there will be more pressure in this area in the future. There was some discussion amongst investors about this a couple of years ago, Hendersons and USS produced this paper, but it didn't seem to go anywhere. However the BP case could well be the start of a trend. It's worth keeping an eye on.
Finally, I can't help but have a laugh at the ABI's conflicting lines on BP over the past few days. I don't blame them in one sense, they have probably been asked for a quote each time and simply supplied a straightforward statement. But the phrase "U-turn" does leap to mind.
From The Times on Monday:
Michael McKersie, assitant director of investment affairs, revealed the ABI had given BP a ‘blue-top’, essentially a clean bill of health in its traffic light system of judging corporate governance breaches.
Mr McKersie said: “A red top is a blatant failing by a renumeration committee. We have carefully looked at everything in BP’s report and it does not fall into this category.”
And from the FT today:
"This was certainly a larger number voting against than you would normally see."
"Remuneration is often a convenient way to express wide-ranging concerns. There is a message here and the company should not be complacent."