Friday, 16 May 2014

Official executive pay shareholder revolt terminology

As we're in AGM season I thought I'd do a short note to help people writing about voting results on executive pay issues choose the correct description for a given outcome.

I start from the point that a vote of less than 10% should not really be reported, except perhaps if you really need to talk it up, in which case anything 8%+ could at a pinch be tagged as a "minor revolt".

When thinking about which cliche to deploy, bear in mind the metaphorical content employed. My rough guideline is that, if you're using the typical 'physical violence' metaphors, you have three basic choices - near physical contact, mild physical pain, severe physical pain. There are also some different options when we look at actual defeats.

So let's get started.

As I said, at a pinch, if you must write about a sub 10% vote against, you should use "minor revolt"

For votes of over 10% but less than 20%, my suggestion is to use a "near miss" physical metaphor, so the official tag here should be "a shot across the bows" or "a warning shot"

When we move into votes of over 20% but less than 30% we can imply real physical contact, but only mild pain. So the correct terminology should "a rap across the knuckles" or, perhaps if at the lower end of the range, "a slap on the wrist". If you want to add a bit of colour (literally) then the result could leave the company "looking red-faced".

When we get into the territory of votes over 30% against but short of a defeat, then severe physical pain should be suggested. Wherever possible, votes of this scale should be described as "a bloody nose". Again, to build on the original cliche, try to think of a pun related to the nature of the company. For example a poor result for a transport company can be a "car crash".

Also with votes of this scale you may want to describe them as "a message", "a clear message" or even "a strong signal" to the board, just to give it a little more weight.

Actual defeats are a special case. All defeats should be described as "hugely embarrassing" for the company. They are also "a strong message", but in this case one which "the board must listen to" or which "the board cannot ignore". The defeat can also be described as "damaging" and can be said to have "left the company reeling".

Finally, if the defeat is not the first one in the season then a further bit of work is required. If this is the second or third actual defeat then it can be described as part of "a wave of shareholder revolts". You might also want to describe the wave as "looking like it might turn into a second shareholder spring".

If the defeat is the sixth in the season, you may officially describe the events in totality as "a second shareholder spring". A larger number of defeats (more than six on the main market) should be described as "a revolution". This is important, as in 2012 unfortunately City AM erroneously described "the wave of shareholder revolts" as "revolution" whereas technically it only merited a "shareholder spring".

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