London, 1 September 2016 – ICSA: The Governance Institute questions whether increasing shareholder voting rights will curb executive remuneration excesses and has written to the Prime Minister Theresa May to advise caution in adopting such an approach.
“Whilst it is clear that the current system for setting and approving remuneration is not working, it is less certain that giving further voting rights to shareholders is the right answer,” says Simon Osborne, Chief Executive of ICSA: The Governance Institute. “Since 2002 the UK has been pursuing a regulatory approach based on a combination of transparency and voting rights. Despite both elements of the approach having being strengthened since then, it has done little or nothing to prevent an escalation of directors’ fees and bonuses.
“The issue is not that shareholders lack the rights that would enable them to hold companies properly to account, but that they are often reluctant to use them. Looking at the five largest shareholder revolts this AGM season, it is striking that the average vote against the report was 54 per cent but the average vote against the chair of the remuneration committee was less than 1.5 per cent. Unless investors become more willing to use the powers they already have, it may be necessary to consider different – and possibly more radical – reforms.”
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