The shareholder spring

A wave of unrest has rocked AGMs in recent weeks, as angry investors take company bosses to task over excessive pay

The shareholders are revolting, and not just the awkward squad who have for years been making AGM day the only occasion when certain company bosses could be dragged from their air-conditioned offices to answer for their decisions.

This time in addition to small shareholders, pressure groups and unions, big City institutions have been making their voices felt.

It has made for a febrile atmosphere at a succession of AGMs over the past few weeks. "Unprecedented," said one shareholder. "I've not seen anything like it."

And it's not over yet.

Pay is the primary reason that anger has reached boiling point. Shareholders large and small are licking their wounds having suffered brutal losses during the financial crisis and recession. And yet bosses' pay is seemingly out of control, reaching new heights every year.

This has led to heckling of boards becoming commonplace rather than a rarity, while non-executive directors, as well as executives, are twitching uncomfortably in the spotlight as they too are held to account.

No longer can bosses glower as angry, small shareholders, sometimes representing charities or unions, stand up and berate them, confident that the institutions will dutifully fall into line when the proxy votes are counted.

Amid public and political calls for action, that is no longer the case – as the insurance giant Aviva learned to its cost this week when it became only the fourth FTSE 100 company to get its remuneration report voted down.

There were also protests at Premier Foods and Inmarsat.

Earlier in the week, unions fired a very public broadside at defence contractor BAE Systems for sacking workers. Then there was the revolt over pay at Barclays, which appeared to light the blue touch paper.

Joanne Segars, chief executive of the National Association of Pension Funds, hails AGMs as "an important touch point for shareholders".

And she has a message for the occupants of Britain's boardrooms: "We have seen some strong opposition to boardroom pay deals recently, and it is something that shareholders are taking seriously. Boardroom pay must become better aligned with the long-term interests of shareholders."

She is backed by Tom Powdrill, spokesman for Pirc, which advises many of Ms Segars' members on voting.

Mr Powdrill says he has seen "a couple of false dawns before", but this time he thinks it's different.

"The stars seem to be in alignment," he said. "You have Barclays and Aviva where there is a feeling that shareholders are not getting the returns to justify the pay, concerns about pay getting out of control and pressure on institutions to be better stewards [of companies] since the financial crisis."

He also claims many fund managers are beginning to draw a line in the sand on some pay deals, finally saying "enough is enough".

The one area where he remains disappointed is that most institutions, which enjoy privileged access to company directors throughout the year, fail to attend AGMs.

"To be honest, that is one thing that does upset the smaller shareholder," he said. "We do think more institutions should make an effort."

George Dallas, director of corporate governance at fund manager F&C Management, said AGMs are an "important component of the corporate governance process in which a company board presents what they have done and what they plan to do. A key component of that, of course, is the vote on resolutions, even if many of them are submitted by proxy".

But Mr Dallas points out that as an institution which invests in several thousand companies worldwide, it is physically impossible to attend even a good percentage of their AGMs. He says he does still find it necessary to attend on occasion if, for example, F&C has not been able to get points across by other means, which does happen occasionally.

"To some extent, an AGM is primarily opportunity for retail shareholders. One of the benefits that we have as an institution is that we typically have other opportunities to engage with management. The dialogue we have is more of a give and take rather than posing a single question – which is often the format of an AGM. It is also useful to do this behind closed doors to allow for a robust and candid discussion.

"But I think it (the AGM) is an important forum for a company and its investors. I have attended such meetings the past and it is an important discipline for the board and company management. They need to stand up publicly and be held to account."

The focus on the AGM brought about by the pay debate, is manna from heaven for those organisations which have sought to exploit them to raise concerns about other corporate practices that they might otherwise struggle to get on the agenda.

One is War on Want, which has used the opportunities created by the 2006 Companies Act requiring firms to send all investors any resolution from a shareholder with support from at least 100 others who each held an average of 2,000 shares.

The pressure group's company secretary used this against Tesco, which was forced to circulate his resolution that demanded supplier factories underwent independent auditing to ensure decent pay and conditions for their employees.

That resolution won support representing over 400 million shares. One in five shareholders ultimately refused to endorse Tesco's call to vote it down.

Since then, the charity has targeted other multinationals, joining forces with like-minded groups to challenge Shell over the Iraq war and Anglo American's treatment of its miners.

John Hilary, executive director, said: "Corporations' annual meetings offer a critical opportunity for campaigners to challenge directors for human rights and environmental abuses.

"Large numbers of British companies continue to exploit people overseas in their supply chains or harm the communities in which they operate around the world. Many of these people are unable to challenge these firms and look to us to do so."

He added: "We back shareholders challenging excessive pay and will use future AGMs to tackle big business which puts money before morality."

If bosses were hoping the furore of the past few weeks is going to be another flash in the pan, they might have to think again.