Gorporate Britain’s least favourite time of the year is
almost here. Each spring, the bosses of the UK’s biggest companies traipse to
conference centres to be interrogated, abused and occasionally praised by
shareholders at their company’s annual general meetings. Weeks of preparation go
into a big AGM – from rehearsals for the chairman and chief executive to
negotiations with big investors to head off potential revolts.
There has never been such a range of
pressures on companies at AGMs as there are now. During the so-called
shareholder spring of 2012, large investors, blamed for not holding boards to
account before the financial crisis, rebelled against pay and other governance
matters at some of Britain’s biggest companies. Bosses were humiliated and some
were forced out.
Political pressure has mounted over the
outsize pay packages earned by bosses. Business secretary Vince Cable forced
companies last year to publish more detail on pay and to put their policies to
a binding shareholder vote.
Companies also face protests from
activists on environmental and social questions such as climate change and the
treatment of workers. Disgruntled small shareholders whose dividend has been
cut, and the possibility of raids by activist investors, are further headaches.
One City investor says: “BG, AstraZeneca, Prudential – for anybody who is in
the headlines there will be a sizeable vote against all sorts of things.”
Here are some of the potential
flashpoints at this year’s AGM season.
HSBC
The reputation of Britain’s biggest bank
has been battered in the past year, not least by the Guardian’s revelation that HSBC’s
Swiss arm enabled tax evasion and aggressive tax avoidance. Chief
executive Stuart Gulliver and chairman Douglas Flint, who said the Swiss affair
was “totally humbling”, will face tough questions. Shareholder groups may also
target Rona Fairhead, who chaired the audit and risk committee, at the AGM on
24 April. They argue Fairhead, who also chairs the BBC Trust, could not have
scrutinised the bank’s activities independently because it paid her £513,000
last year. HSBC has also said it wants to increase Flint’s salary. There are
likely to be protests at that and Gulliver’s £7.6m pay package.
BG GROUP
The oil and gas company was forced to
stage a partial climbdown in December over a £25m pay deal it had agreed with
new boss Helge Lund. But the matter didn’t end there. The former boss of
Norway’s Statoil national oil company could still get the full amount, albeit
for more stretching targets, and his annual salary of £1.5m is higher than
those of the chief executives at bigger rivals BP and
Shell.
BG admits investors are still furious
about the affair. Now they could vote against BG’s remuneration report and the
re-election of chairman Andrew Gould, who also heads the nominations committee.
Paul Hewitt of shareholder advisory group Manifest says: “Some of BG’s largest
shareholders were given minutes’ rather than days’ or weeks’ notice of their
intentions. If I was a significant investor I would be very, very
disappointed.”
WPP
Sir Martin Sorrell, WPP’s chief
executive, was one of the bosses caught up in the 2012 shareholders’ revolt.
Investors voted down his pay package, forcing the world’s biggest advertising
company to replace its long-term share scheme. But it has continued to pay out,
and Sorrell’s £36m share bonus for 2014 will take his total earnings for the
year to more than £45m. Nearly 30% of shareholders refused to endorse Sorrell’s
£30m payout under the scheme at last year’s AGM and a further rebellion is
expected in June. A fund manager at a big City investor says: “The people who opposed
it last year will oppose it this year.”
BP BP has accepted a resolution proposed
by environmental campaigners and pension funds, including the Church of
England, requiring the oil company to report on whether its business complies
with an international agreement to limit global warming to 2C. Royal Dutch
Shell has already accepted the resolution, which also bans executive bonuses
for climate-harming activities. BP’s board has recommended a yes vote for the
resolution.
But when it comes to executive pay, BP
is less popular. Bob Dudley, its chief executive, was paid $12.7m (£8.5m) last
year – 25% more than in 2013. The increase was mainly due to a deferred bonus
from 2011, but in 2014 Dudley cut jobs, froze employees’ salaries and missed
all his safety targets. Pirc, the shareholder consultancy, recommends investors
oppose BP’s remuneration report at the AGM on 16 April.
TESCO
It is hard to imagine how the time since
the last AGM could have gone any worse for Britain’s biggest retailer. Phil
Clarke was ejected as chief executive in September after a string of profit
warnings. His replacement, Dave Lewis, uncovered a £263m hole in its profit
projections. Tesco faces a series of inquiries over the
scandal, including by the Financial Conduct Authority. Lewis decided to close
or abandon almost 100 stores and half-year profits fell 92% to £112m.
Lewis and his new team will probably get
support at the AGM in June but small shareholders will probably be very vocal
over Tesco’s decision to slash its dividend by 75%. The grocer will also be the
main target of campaigners trying to get big retailers to pay employees the
living wage.
SPORTS DIRECT INTERNATIONAL
Last year it took threats of a
shareholder revolt to force the retailer to back down on a plan for a
multimillion-pound bonus plan for its founder, Mike Ashley. Since then the
billionaire, who is Sports Direct’s deputy chairman, has lent credence to the
belief that there is no check on his power at the company. Last month he
insisted he was too busy to appear before MPs to answer questions about
zero-hours contracts – about 80% of the retailer’s staff are on them – and the
closure of a subsidiary in Scotland. The Institute of Directors said last week
that Sports
Direct’s board was dysfunctional and did not check Ashley’s powers.
It urged shareholders to use the AGM to show their dissatisfaction.
ALLIANCE
TRUST
The FTSE 250 investment trust is under
attack by Elliott Advisors, an aggressive US investor. Elliott says Alliance’s
chief executive, Katherine Garrett-Cox, has been regularly overpaid for poor
financial performance. The activist fund is trying to woo at least 50,000 small
shareholders to vote for three new directors it has nominated. With Garrett-Cox
holding firm, expect fireworks at the AGM on 29 April.
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