Protest votes against remuneration reports indicate shareholders are starting to show their teeth
Mining company Xstrata and hedge fund group Man have become the latest FTSE 100 companies to suffer shareholder protests against boardroom pay in further signs that investors are starting to exert their influence.
Some 40% of Xstrata shareholders failed to support the mining group’s annual pay report – 36.5% voted against and the balance abstained. The protest was larger than the 31.5% shareholder rebellion against high pay at the annual meeting of Barclays on Friday.
Two directors at Xstrata’s annual meeting in Zug, Switzerland, also faced revolts from investors. David Rough, a former chief investment officer at Legal & General who is now a non-executive at Xstrata, failed to win the support of almost 20% of shareholders. They are understood to have been protesting against his role as head of the remuneration committee and the fact that he has been on the board for 10 years. Under corporate governance guidelines directors who serve more than nine years are no longer regarded as independent. Rough has been chairman of the remuneration committee only since May.
A 16% protest vote against Ivan Glasenberg also caught the company by surprise. The Glencore boss has a seat on the board and is attempting to take over Xstrata in a bid that some major investors regard as undervaluing the mining company. Glencore owns 35% of Xstrata shares – which, if stripped out, would push the level of protest even higher.
Some 13.5% of shareholders voted against Glasenberg, who has held a series of meetings with Xstrata investors to try to convince them to support the bid, and the level of dissent rose when deliberate abstentions were included.
At Man Group, 15% of investors failed to support the remuneration report at an annual meeting which took place amid speculation that shareholders were putting pressure on chief executive Peter Clarke’s under-performance. In the event a protest did not emerge in the votes for Clarke and he insisted that he had shareholder support as he tried to stifle talk of a takeover bid for the fund management group.
The Xstrata directors who suffered revolts this year had not faced protests last year, although the level of dissent against executive pay levels was similar to that in 2011.
ISS, an influential body which offers voting advice to pension funds, had told its clients that due to “long-standing issues of concern” it could not recommend support for the remuneration report. “We draw attention to the fact that successful completion of the deal with Glencore will lead to all outstanding long-term incentive plans awards vesting with non-requirement for performance conditions to be met,” ISS said.
Xstrata chief executive Mick Davis could cash in shares and options worth £6m, although he has promised to waive a cash payment of a year’s pay, bonus and benefits that he could be due if the Glencore bid succeeds.
ISS, however, did not advise voting against Rough or Glasenberg even though neither of them are regarded as independent.
A spokesman for Xstrata said executives had earned their rewards: “Our pay structure is linked to performance. We achieved excellent and, in many cases, record performance in 2011 despite challenging markets. Ebitda rose to $11.6bn and we increased the full-year dividend by 60%.”
The level of the protest may be regarded as a sign of dissent towards the Glencore bid for Xstrata. Glencore is offering 2.8 new shares for each share it does not already own. Some analysts believe an offer closer to 3.3 shares would be more likely to entice reluctant Xstrata shareholders yet to be convinced of the merits of the deal. They include Standard Life and Schroders.
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