The government is set to bring in legislation to strengthen shareholders’ power to reject excessive boardroom pay packages.
It is planned that the measure, outlined in the report Executive pay: Consultation on enhanced shareholder voting rights, will be brought in under The Enterprise and Regulatory Reform Bill. Final details on the legislation will be announced in June.
This follows growing shareholder dissatisfaction with pay agreements for company executives, including the resignation of Andrew Moss, chief executive of Aviva, after the insurer’s pay polices were rejected by shareholders last week.
Employee benefits consultancy Mercer warned that a binding shareholder vote will not necessarily achieve the intended outcome.
Mark Hoble, a partner in Mercer’s executive remuneration team, says: “We feel that we have a balanced view, taking into consideration the standpoint of each of these stakeholder groups. We are supportive of measures that encourage greater engagement between companies and shareholders on remuneration. However, it is difficult to see how a binding vote on pay issues will address the limitations of the current advisory vote on pay.”
The consultancy pointed out that while the advisory vote has encouraged dialogue between companies and shareholders, it has had limited success in promoting active ownership by shareholders.
The Executive pay: Consultation on enhanced shareholder voting rights closed on 27 April. It was announced by Vince Cable, secretary of state for business, on 23 January as part of a package of measures to address failings in the corporate governance framework of executive remuneration.
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