Institutional shareholders are increasingly voting against company boards in a sign that investors are becoming vocal about issues such as pay and strategy, an influential investor body said.
The Association of British Insurers' (ABI) said that serious breaches in governance led to a much higher vote against companies on controversial issues in 2009, compared with the previous year.
In a review, the ABI's Institutional Voting Information Service (IVIS) said an average of 30% of shares were not voted in favor of management in 2009 when it issued a “red top” concern about an issue, up from 13% in 2008. IVIS uses a color-coded system to advise investors, and a “red top” indicates a matter of serious concern.
“It is clear that shareholders are ready to signal their impatience with companies whose remuneration approach does not take account of the impact of the economic downturn,” said Peter Montagnon, ABI's director of Investment Affairs.
“This mood appears likely to continue in 2010,” he added.
The move comes as investors globally get tougher with company boards after being accused by politicians and regulators of failing to demand greater accountability from companies following the financial crisis.
Financial services minister Paul Myners recently called on major investors such as Standard Life and Aviva to fight excessive bonus payments at banks in which they own shares.
IVIS, whose subscribers hold 30% of the FTSE All-Share index, said it had reviewed voting issues at over 8,500 meetings since January 2000.
Five company reports on remuneration were voted down by investors in 2009. These were Bellway, Provident Financial and Punch Taverns, which were given red-top alerts by the ABI, and Royal Dutch Shell and RBS, which were amber-topped, indicating a matter for “shareholder judgment”. (Reuters)