The Strategist

The Investment Association: British companies overpay top-managers

12/20/2017 - 13:35

According to a list prepared by order of the UK government, 22% of UK companies are dissatisfied with the policies of their leadership. The list includes companies, more than 20% of shareholders of which opposed the increase in salaries of top managers or re-election of the board of directors. Among them are firms such as Burberry, Sky, WPP, HSBC.

kloniwotski via flickr
kloniwotski via flickr
On Tuesday, The Investment Association, an association uniting British investment managers, published a list of public companies whose shareholders are dissatisfied with the policies of their management, including payments to top managers. According to the association's assessment, every fifth British company (22%) in 2017 faced a significant "shareholders' uprising" - the list included companies, more than 20% of shareholders of which at the annual shareholders meeting opposed raising payments to top managers, re-election of the board directors and other similar measures. Among the companies on this list are Burberry, Sky, Sports Direct, WPP, HSBC, Morrisons, BT, Mothercare. In total, about 640 companies included in the FTSE All-Share Index were evaluated.

The list was prepared on the recommendation of the British Prime Minister Theresa May. In August, she proposed to comprise and publish a list of companies whose management do not take into account concern of shareholders and in which "the increase in the salaries of managers is much ahead of the results of the company." The publication is intended to demonstrate the "unacceptable face of capitalism" in order to influence management of these companies. According to Mrs. May, excessive payments to top managers can damage the "social structures of our country", so that companies should strive to increase public confidence in big business.

The Investment Association includes about 200 investment companies, which manage a total of assets at £ 6.9 trillion ($ 9.2 trillion). According to the head of the association Chris Cummings, the list shows "the true scale of investors' anxiety"; many companies need to "seriously listen to the opinion of shareholders and act in accordance with this."

In recent years, policies of management of various companies have been increasingly causing dissatisfaction among shareholders. Payments to top managers are one of the most important points of discontent. As reported earlier this year, a number of large investors, including investment funds such as Fidelity International, Aberdeen Asset Management, Calpers, Standard Life and Henderson Global Investors, are going to increase pressure on company management to reduce payments to top managers and make these procedures more transparent. According to the research group Manifest, in the last year 10% to 20% of shareholders refused to support the increase in payments to top managers of 62 companies from the S&P 500 index and 18 of the FTSE 100 did so - this is the highest level in the last five years. In January, one of the world's leading investment companies, BlackRock, called on British companies to cut back on huge compensation and pension payments to top managers, indicating that otherwise they are facing a "shareholder uprising".


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