Stewardship in 2012

Suffolk County Council: Stewardship in 2012 Introduction Presentation to: Suffolk County Council, 25 th July 2012 Presentation from: Tom Powdrill, Head of Communications Regulated by the FSA

Church Investors Group: Stewardship in 2012 Agenda

Suffolk County Council: Stewardship in 2012 Agenda Key points –The ‘Shareholder spring’: A season of revolts over top pay and other governance concerns. –New shareholder powers: BIS has set out some new reforms for tackling executive pay. –Voting disclosure: Increasing expectations of accountability on the part of shareholders. –The Kay Review: Report of the review into UK equity markets and long-term decision making.

Suffolk County Council: Stewardship in 2012 Developments in stewardship Shareholder opposition to top pay –A renewed wave of pressure: We estimate that the level of shareholder opposition to remuneration reports is up 50%. –A record year: WPP’s defeat last week makes six in total for 2012 so far. The previous highest was five in –Widespread support: There is a general consensus that shareholder activism on top pay is a good thing. –Concerns about performance: Big votes against Barclays, Trinity Mirror and Aviva reflected shareholder concern about the mismatch between pay and performance. –Concerns about quantum: This season shareholders seem to be willing to oppose remuneration policies on the basis that directors are receiving too much. –Political pressure: Shareholders feel obliged to be seen to act?

Suffolk County Council: Stewardship in 2012 Developments in stewardship Average votes against remuneration reports Average oppose vote: 9% Median oppose vote: 4%

Suffolk County Council: Stewardship in 2012 Developments in stewardship Range of votes against remuneration reports

Suffolk County Council: Stewardship in 2012 Developments in stewardship Range of votes against remuneration reports

Suffolk County Council: Stewardship in 2012 Developments in stewardship Big votes against pay this season CompanyOppose %Abstain % Poll oppose % Suffolk vote WPP Oppose Aviva Oppose William Hill Abstain EasyJet Oppose Xstrata Oppose AVEVA Oppose Cookson Oppose Spirax-Sarco Engineering Oppose Prudential Oppose Barclays Oppose

Suffolk County Council: Stewardship in 2012 Developments in stewardship Chief executives forced out

Suffolk County Council: Stewardship in 2012 Developments in stewardship Silent assassins? Vote against: 0.08% Vote against: 4.6% Vote against: 14.6%

Suffolk County Council: Stewardship in 2012 Developments in stewardship Voting on director elections

Suffolk County Council: Stewardship in 2012 Developments in stewardship BIS strengthens shareholder powers on pay –A binding vote: A new forward-looking vote on pay policy that will be binding on the company if defeated. It will be an annual vote, unless companies commit to a three year policy. –Advisory vote: The existing advisory vote remains and will be focused on implementation of remuneration policy. –Exit payments: The company must set out its position in the remuneration policy, which will bind the company. –Vote thresholds: A simple majority on both votes, but if a company receives substantial minority opposition they should issue a statement. The Govt had floated a higher threshold. –What we think: The binding vote will certainly give shareholders more power, but will they use it? Also the retreat on thresholds could mean only a handful of companies face serious pressure.

Suffolk County Council: Stewardship in 2012 Developments in stewardship Disclosure of voting records –Shareholder accountability: PIRC believes that public disclosure makes those exercising economic power more accountable. –Current position: It remains voluntary for shareholders whether to disclose their record or not. –Best practice: Stewardship Code says investors should disclose, ISC issued a ‘framework document’ in –Current practice: Many of the larger asset managers disclose, though in different formats, but the majority of Stewardship Code signatories do not. –Kay Review: May say something on voting disclosure?

Suffolk County Council: Stewardship in 2012 Developments in stewardship Disclosure of voting records ISC framework publishedStewardship Code goes live

Suffolk County Council: Stewardship in 2012 Developments in stewardship Disclosure of voting records

Suffolk County Council: Stewardship in 2012 Developments in stewardship What disclosure of voting records shows Asset manager votes on FTSE100 remuneration reports in 2011

Suffolk County Council: Stewardship in 2012 Developments in stewardship The Kay Review The review’s principal focus is to ask how well equity markets are achieving their core purposes: to enhance the performance of UK companies; to enable investors to benefit from this in the form of returns. It is considering: whether market participants are excessively short-termist if so, what actions might be taken to address this. It is examining the incentives, motivations and timescales of all participants in the equity markets – from end investors, through pension funds, advisers, fund managers, and the markets, to company boards – and the relationships between them.

Suffolk County Council: Stewardship in 2012 Further information

Suffolk County Council: Stewardship in 2012 Contact Tom Powdrill Head of Communications Telephone: Regulated by the FSA