AGM season - what's going on?

As you may have noticed, it's an unusally combative AGM season this year. Already three companies - Bellway, RBS and Provident Financial - have lost the vote on their remuneration report, and a couple more have come very close. In addition there has been a string of AGMs where what would be sizeable oppose votes in a normal season (ie 20% upwards) have been registered.

There are several factors driving this. First, the pro-cyclical nature of much governance activism. Shareholders tend to lose interest in corporate governance issues in the good years - what's the point in arguing over a few mill for the chief exec if the company is doing well? In contrast they kick off in a downturn, especially when the clients are breathing down their neck.

Second, some companies are doing some genuinely stupid things. Amending or scrapping performance targets for bonus and incentive schemes to ensure they pay something out is never popular, but in a recession it's not something even the most acquiescent of fund managers is likely to tolerate. Likewise enhancing the pension of the departing head of a failed bank. (Incidentally, note the sectors that the three companies that have lost the vote come from - housebuilding, banking, subprime lending).

Finally, it's clear that institutional investors feel under pressure to up their game. Having been criticised by the Government and regulators, the industry's rhetoric has been cranked up a notch. Key figures in the industry have acknowledged that fund managers need to be willing to vote against more often.

There remain a couple of bigger questions that (as yet) aren't really getting asked. First, what impact are oppose votes having? They are only advisory, and don't give companies a clear instruction. Companies can even ignore them if they see fit. In practice they do seem to address issues of concern, though more radical critics would argue that it's just a bit of tweaking.

Second, is this a fundamental shift in investor behaviour or not? In terms of defeats for companies, the peak year was actually 2005. Given the scale of the financial crisis, might we not expect to see an even higher level of opposition? And will it continue once the economy picks up? Experience suggests that in the wake of a major crisis behaviour can be influenced for a long time after. But on the other hand there are some pretty engrained attitudes out there about pay (and governance in general) that may not be shifted, particularly if the economic picks up relatively quickly.

The really big question is whether anything could be fundametally different. Is there any scope to get large shareholders to act more like owners, and less like traders? If there is - and it's a bif if - it will take more than voting down a few remuneration reports.