Big Pay Packages Spark Growing Dissent Among UK Shareholders

Mint

5 hours ago

Shareholder dissent over executive pay at British companies is rising just as firms seek to bolster pay packages to remain internationally competitive.
Three times as many companies faced opposition from more than 20% of shareholders so far this year compared with the same period in 2024, data from proxy-solicitation firm Georgeson Inc. shows.
With investors having already voted on remuneration reports from more than half of FTSE 350 companies, 16 faced dissent exceeding 20% between Jan. 1 and May 31 this year, up from five in 2024, the data shows.
'Last year, FTSE 350 companies were more conservative in recommending higher levels of pay, which led to high shareholder support and low levels of opposition,' said Daniel Veazey, Georgeson's corporate governance manager.
Pay packages of UK-based chief executive officers have grown faster this year than those of US rivals, with companies racing to close the gap to attract and retain top talent. The median FTSE 100 CEO package increased 7% to £4.79 million in 2024, according to Deloitte.
'UK Plcs are feeling freer to propose new remuneration policies designed to remain competitive with US and EU peers,' said Sonia Gilbert, Clifford Chance's incentives partner.
London Stock Exchange Group Plc came up against a shareholder revolt at its annual meeting on May 1, with 31% voting against the company's remuneration report, which saw CEO David Schwimmer take home £7.9 million in its latest financial year. Consumer giant Unilever Plc also faced close to 30% opposition against new boss Fernando Fernandez's base salary, which was just modestly short of his predecessor's.
UK companies are challenging the status quo a little more this year, encouraged by widespread shareholder support in 2024 and relaxed Investment Association guidelines on pay, Georgeson's Veazey said.
Of 55 FTSE 100 companies that had published their fiscal 2024 reports, 24 were seeking shareholder approval for new remuneration policies, compared with 16 at the same time last year, research by Deloitte in April shows. Of those proposing changes, more than 40% submitted their policies ahead of the usual three-year cycle.
British American Tobacco Plc CEO Tadeu Luiz Marroco could earn as much as £18.2 million this year under a performance-related policy, a jump from the £6 million he earned in 2024. Compass Group Plc's Dominic Blakemore also stands to benefit from a proposed maximum payout of £15.3 million in 2025, up from the £9.5 million he earned in total last year. Both maximum figures are based on a 50% increase in the stock awards from the date of grant to vesting.
These proposals highlight 'the need to attract top talent in a competitive global market and address pay compression challenges,' said Mitul Shah, a partner at Deloitte's executive remuneration and rewards practice.
The UK government's decision to maintain the removal of the cap on banker bonuses has gone some way to bridging the transatlantic gap. Bank of America Corp. is the latest to join a slew of rivals in scrapping the crisis-era limit. Some of the world's biggest banks are pushing UK regulators to accelerate plans to ease rules around deferred bonuses so they can apply the lighter regime to payouts for 2025.
This follows long-time calls by executives including London Stock Exchange CEO Julia Hoggett that restrictions on pay were hindering companies' efforts to attract game-changing candidates and undermining the attractiveness of the City of London.
Performance, especially in sectors with key competitors in the US and a tight market for talent, will ultimately steer how amenable shareholders are to boosting compensation.
'It comes down to the right shareholder engagement,' Clifford Chance's Gilbert said.