Another big vote against a rem report

This time 33% against and its Imagination Technologies. Also some big votes against directors.

Another remuneration report defeat

No surprise really, but Darty got spanked on the vote on its remuneration yesterday, as well as losing its chief executive. It's a record year - woohoo - for remuneration report defeats however you cut it.

The ones I know of - Aviva, Cairn Energy, Centamin, Central Rand Gold, Darty, Pendragon, Plus Markets and WPP.

Also we know the average vote against is up a fair bit on last year, and some big votes are still coming through.

Clearly some shareholders have toughened up this year, though if you look into the data in detail a few of the big houses still only oppose a fraction of companies.

Anchoring and pay

I am very pleased. I've just managed to demonstrate the well-established cognitive bias known as 'anchoring' using a sample of well-educated people who work in corporate governance in one way or another (policy, asset management etc).

We gave all audience members a set of questions, one of which was to estimate the average fees paid to a supervisory board member in Germany. Before asking them for their estimate we exposed them to a figure which we explicitly told them was false. One group got a very high figure, the other got a low figure.

The result, as you might expect, was that those exposed to the very high (but irrelevant) figure gave higher estimates than those exposed to the low figure. The size of difference was dramatic - the average estimate with the high prompt was more than six times larger than the estimate with the low prompt.

I'm going to run this on a bigger sample next time. Would be good to use a sample of corp gov people who regularly analyse and/or engage on pay.

Betfair & political donations

Interesting one this. Party political donations are very rare by UK PLCs these days (except Caledonia...) and are usually opposed by institutions (unless they donate too....). As a result most of the time when companies seek authorities wit a political donations resolution a) they are seeking authority to incur expenditure rather than make donations and b) the resolutions pass very, very easily.

Betfair just got a 29.5% vote against its resolution seeking authority to make political donations. This is almost certainly because it did make party political donations. Actually these were in Germany - to the CDU and FDP. Considering that a fair chunk of Betfair's shares are held by directors this looks to have been a very large revolt by independent shareholders.

Company loses binding pay vote, world does not end

Sports Direct was blocked in its attempt to set up a new bonus plan for Mike Ashley (no laughing). The other interesting point about this one is that the plan was proposed with a special resolution, so needed 75% to get through.

As we know from the debate about exec pay reform earlier this year, a combination of a binding vote and a higher threshold to pass is bordering on a Khmer Rouge approach. As such there can be no doubt that a) Sports Direct will be plunged into an existential crisis as a result of this vote and b) shareholders will be hugely disappointed with this outcome. 

Institutional Investor Committee

It's been a while since I blogged about the IIC (version two), mainly because it doesn't seem to have done anything.

The last public statements I can see are from March, on audit (EU proposals) and executive pay (UK Govt proposals). On the former I would say that the IIC position is a lowest common denominator one, as I know there are institutional investors who take a different view. The content also looks very similar to that used in one of the IIC member's own presentations, which makes me think that this could mean it's just one body's position slightly rehashed.

The statement on the BIS consultation on executive says nothing specific on the actual proposals, probably because the key measure - a binding shareholder vote - was (I think) not supported by any of the IIC members. There is, however, some accompanying commentary which is worth a read.

There's nothing since March though. Nothing on the 'shareholder spring' (barf), or on the Kay Review. The latter surely is worthy of comment given that he proposes a new 'investor forum', which would presumably cut across the IIC's role?

Ho hum.
 

Against incentive pay schemes

A new report out from the FSA does a rather good job in showing what the problems are. From the blurb -

• Most incentive schemes were likely to drive people to mis-sell and these risks were not being properly managed;
• firms failing to identify how incentive schemes might encourage staff to mis-sell, suggesting they had not properly thought about the risks or simply turned a blind eye to them;
• firms failing to understand their own incentive schemes because they were so complex, therefore making it harder to control them;
• firms relying too much on routine monitoring of staff rather than taking account of the specific features of their incentive schemes;
• sales managers with clear conflicts of interests, such as a responsibility to manage the conduct of sales staff whilst themselves able to earn a bonus if their team made more sales; and
• firms not doing enough to control the risk of mis-selling in face to face situations.