How did shareholders vote, and what level of dissent did they give voice to in the annual general meetings held by UK firms during the spring season? This article explores the details and crunches the numbers.

This month the team at independent corporate governance and proxy voting service Minerva Analytics looks at voting trends and shareholder dissent at the UK’s top 350 companies. Average overall dissent across all resolutions considered at shareholder meetings of the UK’s largest 350 companies was 3.23 per cent in the first half of 2021. Figure 1 below illustrates the mean and median yearly dissent over time. The voting results for the first half of the year suggests that the recent upward trend seen in shareholder dissent has continued this voting season.

High dissent resolutions
The chart below shows the number of companies and the number of resolutions that received high dissent over the past eight years since investors have had a binding vote on remuneration policy.

In the first half of 2021, 72 companies have received 20 per cent dissent or more on at least one resolution. Notably, over half (52.78 per cent) were repeat offenders, meaning that the company also received high dissent in 2020. This data would seem to suggest a breakdown in communication between companies and shareholders: either companies are not listening to feedback, or shareholders are not explaining effectively - or possibly a mixture of both.

Within the review period, 21 resolutions proposed by management were voted down by shareholders. This compares with the 23 defeated resolutions in the full 2020 calendar year. The data show that more resolutions have been voted down by shareholders in the first half of 2021 than in each of the full calendar years of 2014 to 2019. The results indicate that 2021 could become the new record year for defeated management resolutions when all shareholder meetings have been held and voting results collected.

Remuneration
Executive pay continues to be a high-profile issue and remuneration-related resolutions prove to be the most consistently contentious resolution category of those routinely proposed by management. The dissent level on remuneration resolutions in the first half of the year stands at its highest level since binding remuneration policy votes were introduced in 2014. Remuneration-related resolutions received on average 8.72 per cent shareholder dissent, more than double the 3.23 per cent average. Notably, the average dissent on remuneration policy resolutions in the first half of 2021 is over 10 per cent for the first time. 

Remuneration-related resolutions have overtaken board-related resolutions for the highest count of high dissent resolutions in 2021. There were 60 high dissent remuneration-related resolutions, more than the 59 remuneration-related resolutions in the whole of 2020. The primary drivers behind the dissent appear to be remuneration complexity, base pay increases larger than the wider workforce, and the continuing impact of COVID-19 concerning the use of discretion and/or adjustments.

During the 2020 and 2021 voting seasons, several companies have adjusted their approach to remuneration in response to the economic impact of the pandemic. The most common changes have been a temporary reduction in base pay, a freeze on salary rates and a delay in target setting. Other companies also adjusted incentive pay outcomes, with some deferring annual bonus pay-outs or cancelling the bonus in full.

Shareholders expect executive remuneration to be aligned with the overall experience of the company, its shareholders, employees, and other stakeholders. Institutional guidelines have also set out an expectation for the use of government support, staff redundancies, raising additional capital from shareholders and the suspension of dividends and/or share buybacks to be reflected in remuneration outcomes. 

Despite clear shareholder expectations, many companies still received high dissent due to perceptions of doing the wrong thing. In some cases, the company in question receiving high dissent had performed strongly but still received high dissent, potentially indicating a wider attitude shift on remuneration and societal expectations on fairness and shared sacrifice during the pandemic.

These trends suggest that remuneration continues to dominate the headlines and shareholder-board engagement. It also appears that remuneration is increasingly being considered through an ESG lens, with a number of the highest dissent resolutions connected to ESG issues and questions over fairness and societal expectations on responsible business behaviour during the pandemic.

Methodology
For the purposes of this analysis, dissenting votes are those purposely not cast in favour of a management proposal and include both “abstain” and “against” votes. Under UK company law, abstentions currently have no legal authority, but over many years they have become a strong indicator of shareholder sentiment and are used to demonstrate that they cannot fully offer their support.

Companies have been classified as being a top 350 company as at the date of their shareholder meeting during review period. The period 2010 to 2020 covers a full year’s data while 2020 includes 1 January to 30 June.

The full voting review is available at: www.manifest.co.uk/downloads/2021-uk-proxy-season-review