Britain's biggest pension funds are demanding “super-majority” votes on executive pay to stop companies shrugging off shareholder rebellions.
The UK’s influential Pension and Lifetime Savings Association (PLSA), which speaks for 20 million pensioners and £1 trillion of assets, has called on the Government to raise pay-vote thresholds so boards face tougher consequences from investor insurrections.
The PLSA hopes the move will stop boards claiming “victory” if the vote passes with a slim majority and give active shareholders more clout in shaking up eye-watering pay packets.
“Losing the pay award vote is quite rare, but significant levels of dissent are more common,” said PLSA policy chief Luke Hildyard said.
“Companies don’t really take the votes against pay awards that seriously, they’re happy as long as they get through so they just put out dismissive boiler-plate statements noting the dissent.”
Under the proposed rules, companies would need to get a super-majority of more than 75% approving chief executive pay awards or face a second irreversible vote on the overall pay policy.
If they lose that vote, held within 90 days of the first, boards could be forced to go back to the drawing board and restructure bonus and share award schemes.
The super-majority proposals form part of a consultation by Prime Minister Theresa May on corporate governance reforms.
It has proposed stronger consequences for firms losing shareholders votes.
The International Corporate Governance Network — which represents investors such as Aberdeen Asset Management, Schroders, BlackRock and big Canadian pension funds — has also backed the plan although stopped short of calling for a super-majority.
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