I've had a steady stream of media calls over the past week or so, mainly in response to the large vote against Tesco's remuneration report. That one AGM seems to have rekindled the never-very-dormant meejah interest in executive remuneration, and shareholders' role in respect of it. The questions I always get asked about this subject are as follows:
* What happens if a company loses the vote on their remuneration report?
* How many companies have lost the vote this year/last year/etc?
* Is shareholder voting on pay working?
Given that the default meejah narrative is one of cynicism about both motives and outcomes, they find what I tell them in response to these questions quite pleasing - losing the vote doesn't compel the company to do anything, very few companies lose the vote, and overall exec pay has kept going up. Great! It's a crap system, and the people supposed to make it work are rubbish at it. Write your own op-ed....
Notably, this sort of cynicism seems to have seeped into the market too, with a number of participants very sceptical about the value of shareholder voting in general, and on remuneration reports in particular. I can accept that on one level - it's not impossible that shareholder oversight is a poor model for addressing exec pay (though a genuinely workable alternative isn't as obvious as you might think). However I do think we should be a bit wary, for the simple reason that I don't think investors have ever really tried to make the system work as expected.
What I mean by this is (based on my own geeky obsession with voting records) it's clear that there are many institutions who only vote against a handful of remuneration reports a season. Across the whole market that translates into dissipated pressure on remuneration. Add to that the fact that most investors seem to only take a firm line on notional performance linkage, not scale of rewards, and you have a situation where you can't really blame companies for concluding that - as long as they genuflect to performance linkage - they can pay their execs pretty much what they please.
There are two points to draw from this. First, there is a danger that there will be institutions who go straight from doing little to concluding what little they do makes no difference. This is what frustrates me about the whole 'voting doesn't make any difference' line of argument - I don't think we have given it a proper try. So second, why not give it a try? Why don't institutions simply turn the level of opposition on remuneration up a couple of notches and see if they can make a difference? Why not start taking a position on 'quantum' or pay differentials and see if we can draw a line in the sand?
At the very least it would give me something new to say in interviews....