Home Listing

Institutional Investors Bite Back

<em>Company executives have had it their own way for too long – investors are stepping up to the plate.</em>
Reported by Featured Author

(May 9, 2012)  —  Large investors around the globe are staging a revolt and turning on companies, in which they hold shares, demanding their voices be heard on corporate governance issues.

The most prominent calls have come in the last fortnight, as investors from Europe and North America have voted down executive pay proposals made by a range of companies.

In the United Kingdom, the Chief Executive of insurance company Aviva, Andrew Moss, stood down yesterday after shareholders had narrowly missed voting down his remuneration package last week. This followed the announced departure of newspaper Group Trinity Mirror boss, Sly Bailey, and the pharmaceutical company chief David Brennan stepping down from AstraZeneca.

In Canada, the Ontario Teachers’ Pension Plan said it would vote for a proposal led by Pershing Capital Management to bring fresh blood to the directors of the Canadian Pacific Railway. The proposal would see the departure of CEO Fred Green.

Institutional Shareholder Services (ISS), the proxy advisory firm, has already aired support for the proposal that would oust the current CEO.

Over the last month, shareholders and proxy voting firms called on JP Morgan to split the role of Chairman and Chief Executive, which is currently held by Jamie Dimon.

In March, a study on shareholder voting showed listed companies were taking increasing notice of proxy voting advisory firms when shaping executive pay packages.

A survey by The Conference Board, Nasdaq and The Rock Center for Corporate Governance at Stanford University found ISS and Glass Lewis offered the same advice on votes 75% of the time, offering substantial influence over a company vote.

During the 2011 proxy season, no company that received a positive recommendation from ISS failed its SOP vote, and 12% of companies that received a negative recommendation from ISS failed their SOP vote.

In the UK, the National Association of Pension Funds (NAPF) launched a scheme under which pension fund investors will conduct open dialogue with some of the largest listed companies in the United Kingdom over their executive pay arrangements.

The initiative, co-led with Hermes Equity Ownership Services (EOS), has already seen 44 of these top 100 companies meet with a similar number of pension funds to discuss measures that could better align both sets of interests.