Fat cat bosses to get taste of the X Factor

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Investors are growing more willing to “vote off” bosses who award themselves excessive pay, in a similar style to audiences of television shows such as X Factor, according to a Leeds investment manager.

They are slowly but surely venting their anger at annual meetings with pay deals for executives at Barclays, Aviva and advertising giant WPP being voted down, according to Brewin Dolphin, which has 41 offices throughout the UK.

“The media is alerting the public when contentious votes are looming, usually surrounding pay and performance. The web is also making it easier to poll investors’ views and publish them, helping investors to have a voice, their views considered and the capitalists a chance to reconnect with those who wish to put up their savings as risk capital in UK PLC,” said divisional director of Brewin Dolphin, Martin Payne.

“Investors have the power to change corporate behaviour – it just needs investors, whether they are shareholders through a portfolio, ISA savers or pension scheme members, to take a real interest.”

He likened investors’ willingness to protest against executive pay to television audience’s desire to make their opinion count on the outcome of their favourite programme and says investors’ attitudes are changing.

He said: “Whether its X Factor, Britain’s Got Talent or Jesus Christ Superstar we Britons love to have a say and cast a vote. Millions of avid reality TV watchers up and down the country rush to pick up the telephone in a bid to keep their favourite wannabe star in the frame for glory.

“Yet when it comes to our own money most of us keep schtum. Even if you wanted to give a highly paid City executive the thumbs down in a Simon Cowell-like manner, most investors don’t seem to want to get involved.

“But perhaps the tide is turning. Evidence suggests that there is a growing band of investors who are standing up for investors’ interests.”

He cited examples which include a shareholder revolt over the pay of chief executive of WPP, Sir Martin Sorrell, where his £6.8m pay package was voted against by almost 60 per cent of shareholders. However, currently a shareholder vote is not binding on the company, although it is embarrassing.

In what was dubbed the ‘shareholders spring’ top executives at other major British retailers including Sainsbury’s and Tesco took pay cuts and companies including Barclays and Prudential also faced shareholder revolts.

Politicians are strengthening shareholders’ voices after ordering a review into how quoted companies were governed.

“Vince Cable, the secretary of state for business, recently asked Professor John Kay to look into UK equity markets, their long-term performance and the governance of companies. Not surprisingly, Kay unearthed several issues which need to be addressed, and he particularly wants private investors to play a bigger role in the stewardship of UK companies,” said Mr Payne.

“Most shares are controlled by institutions on behalf of savers in collective investments and pension funds but according to the Office for National Statistics around 10 per cent are in the hands of private shareholders.

“It is possible that this proportion is nearer 25 per cent if you include employee shareholders and the many individuals who hold shares through Individual Savings Accounts, their pensions and their brokers or investment managers’ nominee services, including Brewin Dolphin’s.

“Traditionally, investors who hold shares in a nominee account are not sent the annual report or an invitation to annual meetings because their names are not on the share register. A nominee account groups together investors’ shares in single blocks to generally administrate the holdings and collect dividends on their behalf.

“But savers who do invest through nominee accounts can have voting rights, if the nominee chooses to provide them, and the right to receive a company’s annual report on request from the company.

“Indeed, some investment managers and stockbrokers allow nominee shareholders their right to vote,” he added.

He said that the tide is turning and that technology is helping shareholders to have their say and raising awareness of when key issues are rising to the surface.

“Investors have the power to change corporate behaviour it just needs investors, whether they are shareholders through a portfolio, ISA savers or pension scheme members, to take a real interest,” he added.