United Kingdom

Details

  • Service: Tax
  • Type: Press release
  • Date: 19/11/2012

“What shareholder spring?” asks KPMG’s 2012 Guide to Directors’ Remuneration 

  • Actual level of shareholder dissent on pay was lower in 2012 than 2011, finds KPMG

 

  • Real flexing of shareholder muscle on pay likely to come in 2013 and 2014 as remuneration plans come up for renewal, says KPMG

 

 

2012’s “Shareholder spring” was something of an illusion, according to KPMG’s 2012 Guide to Directors’ Remuneration which reveals that there was less shareholder opposition on pay in 2012 than in 2011.

 

According to KPMG’s research, during 2012, 10 companies in the FTSE-100 experienced significant levels of shareholder dissent on remuneration report votes. In 2011, this figure was 34.  In addition, the overall average level of support remained above 90 per cent in 2012.  The table below sets out the detailed picture:

 

 

Number of resolutions with greater than 20% oppose and abstain

 

 

FTSE 100

FTSE 250

2011

2012

2011

2012

Rem reports

34

10

24

29

New share plans

0

1

5

0

Amended share plan

3

1

1

0

 

[Source: PIRC]  

 

 

Commenting on the findings, David Ellis, head of reward at KPMG in the UK, says: “The actual story of the ‘shareholder spring’ is not one of a mass demonstration of shareholder discontent.  Instead, it is best described as the public demonstration of shareholder disapproval towards a limited number of companies relating to specific circumstances and issues.  A number of these were not solely pay related, but instead were driven by a combination of dissatisfaction around corporate performance and the leadership of the business.  In many cases this year, shareholders really were focusing on the link between pay and performance.”

 

Looking ahead to next year, David Ellis, predicts further and more meaningful shareholder opposition to executive pay proposals as a growing number of long term incentive plans come up for renewal:

 

“It is our view that the flexing of shareholder muscle in 2012 may well be a rehearsal for what is to come.  For example, the last few years has seen only a relatively small number of new long-term incentive plans being proposed to shareholders.  A number of companies have clearly being waiting to understand better the economic and regulatory landscape before formulating new plans and consulting with shareholders.”

 

New/amended LTIPs so far in 2012 (data up to 31 August 2012)

 

New/amended LTIPs so far in 2012 (data up to 31 August 2012)

 

David Ellis continues:  “Typically an LTIP has a ‘shelf-life’ of between five and ten years. So next year and in 2014 we expect the number of plans proposed to increase significantly and for shareholders to view such requests for approval very carefully.”

 

In KPMG’s view, in order to receive a clean bill of health at their AGM, remuneration committees will need to be comfortable they have:

 

  • understood investor views and expectations;

 

  • created a clear link to strategy by clearly aligning the components of pay with the company’s aims and key performance indicators;

 

  • demonstrated the link between pay and performance, so that success is rewarded and there is no potential for payment for ‘failure’; and

 

  • complied with the new regulatory requirements and used the changes as an opportunity to enhance the communication with shareholders and improve the relationship.

 

David Ellis concludes:  “It is addressing these four clear imperatives that will determine the extent to which the shareholder spring in 2011 was simply a rehearsal for a stormier 2012.”

 

Data Highlights

 

  • With the exception of FTSE 100 CEOs total earnings remain relatively flat year on year, as shown by the following charts

 

FTSE 100 Median total earnings 2011 and 2012

 

 

FTSE 100 Median total earnings 2011 and 2012

 

 

 

 

 

FTSE 250 median total earnings 2011 and 2012

 

 

FTSE 250 median total earnings 2011 and 2012

 

 

  • Base salary increases, where given, are modest with a median of around 3%

 

  • Annual bonus payments are lower than 2011, but still remain significant

 

  • Payouts under long-term incentive plans have increased, reflecting an improvement in performance from the start of the economic downturn

 

Ends

 

KPMG Press Office: 0207 694 8773

 

Notes to editors.

 

KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 11,000 partners and staff.  The UK firm recorded a turnover of £1.7 billion in the year ended September 2011. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 152 countries and have 145,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  KPMG International provides no client services.

 

 

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KPMG's Guide to Directors' Remuneration 2012