Investors Reluctant to Shell Out for Under-Performing Execs

20 May 2009

Earlier this year, there was much speculation about whether the recession would mean more active shareholder engagement with the companies they invest in. The Investment Management Association seems to think so.

And Shell executives were yesterday given an emphatic reminder of this issue, when 59% of shareholders voted against the company's remuneration policy.

Commentators have drawn parallels with a similar vote at GSK six years ago. At that time, new legislation had compelled UK listed companies to put their pay arrangements to an advisory shareholder vote for the first time. Many, it seemed, were caught unawares. Shareholders, represented by groups such as the National Association of Pension Funds, made clear their intention to hold executives to account over what were seen as excessive rewards for poor performances. The arguments set out by the then NAPF Chief Executive, Christine Farnish, will still resonate with investors in today's troubled markets.

The Shell vote suggests that the lessons of six years ago have not yet been learned. So what next? Perhaps, as Nils Pratley argues in the Guardian today, shareholder votes on remuneration issues should be made more than just "advisory"?