Heed our anger over pay, warn investor giants

BOARDROOM directors came under fresh assault today after one of the City’s most influential shareholders laid the blame at their door for failing to rein in tarnished pay deals for star chief executives.

Hermes Investment Management, which looks after the £40 billion BT Pension Scheme, urged FTSE directors to “raise their game” after a wave of anger over rising CEO pay threatened to spill out into open revolt at this year’s meetings season.

A humiliating pay defeat for BP boss Bob Dudley over his £14 million package last week has sharpened fears in the City’s boardrooms that investors will rebel against rising pay deals. Several FTSE chief executives lost their jobs in 2012 when a similar uprising, dubbed the shareholder spring, triggered a spate of defeats for companies over their pay practices.

Tension was ratcheted up today by a stark warning from the Investment Association, the body representing £5.5 trillion of City investments, that executive pay at UK listed companies was not “fit for purpose”.

Chief executive pay has trebled on average over the past 18 years but shareholder returns have failed to keep pace, it said in a report penned by heavyweights like Legal & General boss Nigel Wilson, Sainsbury’s chairman David Tyler and London Pension Fund chair Edi Truell (pictured).

“Shareholders have got to get more involved and say to non-executives we don’t have a vote for fun. If we vote down a remune ration package, bloody well implement it,” Truell told the Standard. “I would abolish bonuses for chief executives altogether. Chairmen and remuneration committees have got to stop trying to shirk their responsibilities by passing it off to remuneration consultants who are a waste of time and money.”

Hermes, one of London’s oldest shareholder activists, fuelled the anger by hitting out at boards, adding that it was their responsibility to shoot down ballooning pay instead of fund managers, who are often criticised for failing to halt runaway awards.

“This voting season is a crucial test of how the UK remuneration law works in practice and, importantly, is likely to highlight that boards and remuneration committees in particular need to raise their game,” Hermes’ Hans-Christoph Hirt said.

Several other companies, including Anglo American, AstraZeneca, Reckitt Benckiser, HSBC and Schroders, have been flagged up by shareholder voting groups as vulnerable to investor rebellions.

Anglo American boss Mark Cutifani faced angry shareholders today