Voting levels for the FTSE All-Share in the 2005 AGM season have exceeded 60%, according to RREV, the corporate governance body, jointly owned by the National Association of Pension Funds and ISS, a global corporate governance services provider.
RREV’s post-AGM season report, Voting Review 2005, reveals that the highest levels of votes were observed at AGMs of FTSE 250 companies with 63.63% of votes cast. Voting levels at both the FTSE 100 and SmallCap companies were marginally below 60%.
The report highlights that two generic aspects of executive remuneration attracted the highest levels of shareholder opposition and dissent: service contracts and retesting, both of which have been an area ofconcern for RREV and the NAPF in recent years.
Ex-gratia and other non-contractual payments also resulted in high levels of opposition. In the case of United Business Media (UBM), the remuneration report was not approved by shareholders at the AGM. Just over 87% of those who voted rejected UBM’s remuneration report – 77% voted against and 10% abstained.
Peter Thompson, CEO of RREV, commented, “Both management and shareholders are trying very hard to do the right things in these times of heightened awareness and unprecedented scrutiny. I’m encouraged that overall voting levels are now around the 60% mark, which indicates that investors are taking their stewardship responsibilities seriously. 2005 has also demonstrated that institutional investors are prepared to register their disapproval when they believe management has crossed the line and has not responded to their concerns, for example, over the issue of Lord Hollick’s special £250,000 bonus earlier this year at UBM’s annual general meeting.”
Paul Myners, who published a progress report on his Review of the Impediments to Voting UK Shares earlier this year, added, “RREV’s findings are welcome. The increase in voting levels are an indication that the efficiency of the voting system is improving. I hope this improvement continues.”
RREV’s report also highlights that some companies in 2005 deliberately adopted a minimally compliant approach when disclosing their voting results, merely announcing whether each resolution proposed at the AGM was passed or not. Although this satisfies the letter of the current Combined Code and Company Law, it is highly questionable whether such action reflects the spirit of transparent communication with shareholders that these frameworks were intended to encourage. At some companies where there have been contentious issues, boards have been able to use this loophole to their advantage.
Peter Thompson concluded, “The report’s findings are encouraging and we commend companies that aspire to good practice. Good corporate governance can mitigate risks and improve value for institutional investors.”