Remuneration - Why And How Directors’ Pay Should Be Improved

Directors’ pay is too high in many cases and needs to be reduced. High pay is looking increasingly like it is politically unacceptable and this may lead to a backlash of business regulation that will be detrimental to investors.

This campaign is aimed at improving the quality of remuneration arrangements of the companies listed on the Main London stock market, and the AIM market managed by the London Stock Exchange, so that:

i. investors are less likely to lose money as a result of investing in companies that pay their executives too much or for the wrong things.

ii. investors are more likely to receive better returns as a result of better alignment of executives’rewards with those of long term shareholders and incentives that focus on long term performance.

UPDATE 13 June 2018

Remuneration continues to be a key issue for investors and the ShareSoc Remuneration Guidelines, published in June 2106, are proving to be helpful. We now need to ensure they receive a wider audience. We are planning a campaign to send them out to companies, Chairmen, CEOs, FDs and NEDs, NOMADs, corporate brokers, financial advisers and fund managers.

We encourage members to send copies of our guidelines to companies where they are unhappy with the current remuneration arrangements.

We have now split the guidelines into separate documents which focus on only smaller companies (<£200m market cap) and larger companies. Click below to download the guidelines:

Smaller Companies Remuneration Guidelines (14 pages)

Larger Companies Remuneration Guidelines (12 pages)

Why And How Directors’ Pay Should Be Improved

Directors’ pay is too high in many cases and needs to be reduced. High pay is looking increasingly like it is politically unacceptable and this may lead to a backlash of business regulation that will be detrimental to investors. ShareSoc Directors Cliff Weight and David Stredder discussed Remuneration in this video, which gives useful background on the issues and is still topical today http://www.piworld.co.uk/2016/05/03/mello-april-2016-remuneration-qa/

This campaign was launched with the publication of ShareSoc’s Remuneration Guidelines and a Press Release in May 2016, which received wide media coverage.

To see the ShareSoc Remuneration Guidelines go to Remuneration-Guidelines. Key opinion formers have given their support to the ShareSoc Remuneration Guidelines.

Remuneration Forum

We have set up a Forum for ShareSoc Full Members where you can add comments on remuneration issues: https://www.sharesoc.org/forums/forum/remuneration-forum/ . There are comments on many companies in the Forum which also contains copies of Manifest’s Corporate Governance reports on a number of large companies with contentious arrangements.

Press Releases

We have also issued a series of press releases on companies where pay is excessive. These have been widely reported in the press. In 2016, we have issued 7 press releases so far (Anglo American, Berkeley Holdings, BP, Persimmon, Reckitt Benckiser, RELX and WPP). You can view our press releases here. Use the search box above to search for comment on specific companies.

Company Issues

These are some of the companies we have covered in this campaign during 2016:

Anglo American: Company has shrunk by 80/90% but no reduction in remuneration. LTIP award is same % of salary and offers windfall opportunity – it should have been reduced in size.

Berkeley Holdings: Unnecessary and excessive pay. Excessive dilution. Awards granted at low point in business cycle.

BP: High pay (£14m), the combination of high pay and 20% increase when making £5.5Bn loss, high pension, bonus is pensionable, balanced scorecard targets are too easy and don’t reflect the shareholder experience.

Persimmon: Unnecessary and excessive pay. Excessive dilution. Awards granted at low point in business cycle.

Reckitt Benckiser: High pay (£23m), soft targets, huge LTIP and option awards even though no need for additional incentives.

RELX: Pay of the CEO (£11 million in 2015 and £50 million since he became CEO) too high, excessively complex (5 incentive schemes and 1/30th defined benefit pension scheme), and incentive targets are too easy.

WPP: Unnecessarily high pay (£70 million this year).

We plan to continue with similar numbers of press releases in future.

Attendance at and asking questions about remuneration at AGMs

One of the best ways to hold Boards of Directors to account is to attend their AGM and ask questions. We have increased our visibility at AGMs this year in this respect. And we have fired a warning shot to Companies and their Remuneration Committees that we will question excessive and unnecessary remuneration. We plan to continue to do this in 2018 and urge all ShareSoc members to participate in this campaign.

In 2018, so far, we have attended and asked questions at the AGMs of:

RTC Group
Aviva
Unilever
Reckitt Benckiser
Prudential
RBS

To Support the Campaign

Note that many of the things we would like to see so that shareholders had more control over pay are promoted in our Shareholder Rights campaign. Click on this link for more information.

If you wish to make a voluntary contribution to support the costs of running this campaign please go to this page of our web site: Donations. Alternatively we do recommend a paid subscription to ShareSoc which gives you many other benefits.

You can use the Contact form on this web site to request that you be added to our contact list for the Remuneration Campaign, or if you have any questions on the Remuneration Campaign. Likewise if you wish to contact the Campaign Manager, who is currently Cliff Weight, please use that contact form.

Post Date: May 20, 2016

Group description:	Our group is interested in sustainable investing and our goal is to identify and evaluate businesses that will thrive through innovation and their transition to a ‘One Planet Economy’. By leveraging the skills of group members, we aim to deeply understand these businesses, particularly focusing on how they develop long-term valuable benefits for their customers. Each year, we plan to evaluate around seven businesses to identify opportunities where our valuation exceeds the market price. A successful outcome is defined as achieving a compound annual growth rate (CAGR), including dividends, of 10% over a decade.
Meeting Type/Venue:	Meetings are in-person in a pub near to Waterloo station in London.
Meeting Frequency/Timing:	Meetings are bi-monthly on a Monday from 10:45am to 4:30pm. Members are expected to also pay for their own lunch which secures the group free use of a private room in the pub. The cost is expected to be £35-40 per person, per meeting, in addition to your SIGnet membership fee.

Group description:	SIGnet Taunton is a new group with around 10 keen members at present, with a range of investment styles and experience. We welcome new members.
Meeting Type/Venue:	In person meetings at a golf club near to the centre of Taunton.
Meeting Frequency/Timing:	We meet on the first Monday of every month at a golf club near to the centre of Taunton, 11am until 3pm with a lunch break.

Group description:	An online group for those who are new to investing, or have only been investing for a few years. Including topics such as: – What is a share or a bond, why and how to buy them. – Comparing funds, unit trusts, Investment trusts and exchange traded funds. – Portfolio management and diversification. – ISAs, pensions, SIPPS and how to save tax. – How terms such as PE ratio and dividend yield are used to value a share. – How to use technical analysis or charting.
Meeting Type/Venue:	Online using Zoom.
Meeting Frequency/Timing:	Meetings are usually held on the last Monday of the month at 7:00pm.

Group description:	An online group for those who already have some experience in investing. Covering topics such as finding companies to invest in, financial statements and ratios, valuation / margin of safety, analysis of companies and investment trusts and exchange traded funds.
Meeting Type/Venue:	Online using Zoom.
Meeting Frequency/Timing:	Meetings are usually held on the last Wednesday of the month at 7:00pm.

Group description:	The Equity Income Group welcomes investors of all levels of experience, from beginners to advanced. The focus of meetings is on dividend paying Investment Trusts, though there is also discussion around individual shares.
Meeting Type/Venue:	Meetings are held online.
Meeting Frequency/Timing:	Meetings are held every 6 weeks on a weekday between 7 and 8:30pm.

Group description:	A welcoming group open to all types of investors. Typical meeting content is to have a deep dive presentation on a topic selected by the participants and a session on buy/ sell/ key lessons learnt last month.
Meeting Type/Venue:	In person at a friendly pub close to Piccadilly Circus
Meeting Frequency/Timing:	Monthly during the evening on the first Wednesday of the month.

Group description:	All levels of experience welcome. A typical meeting agenda includes: – Macro Environment – Trades: Members review existing positions and identify securities with promising TA entry patterns or setups and with suitable risk/reward. Any security, long, short, futures, options may be considered. The convener takes actual positions in trades and maintains his own detailed ledger, accurately measuring performance of individual securities and cumulative activity. Members are notified by e-mail prior to the entries or exits that are decided upon. Following each meeting an updated copy of the ledger is circulated together with the next meeting agenda. Members may wish to maintain similar ledgers of their own but there is no obligation to do so. – Technical Analysis: Techniques and systems used in trades. Members can request discussion of particular aspects of TA.
Meeting Type/Venue:	Online via Zoom
Meeting Frequency/Timing:	The first Tuesday of every month from 7 to 9pm

Group description:	Open to all investors / people with an interest in investing. Typical meeting will involve members talking about recent purchases, successes, failures and possible future purchases. Also with occasional visiting speakers or members making presentations on a topic of interest.
Meeting Type/Venue:	We aim to meet on the last Tuesday of each month in a private room at a pub in Playhatch. Start time 7pm with members encouraged to meet up around 6pm for a bite to eat / drink before hand, if their diaries allow.
Meeting Frequency/Timing:	7pm on the last Tuesday of the month. Meetings likely to last about two hours but with informal ‘overspill’ before / after.

Group description:	Group focused on active investing, primarily in small / medium cap UK equities.
Meeting Type/Venue:	Regular Zoom meetings interspersed with occasional face to face meetings and social activities in the North West.
Meeting Frequency/Timing:	Monthly on Saturdays at 10am.

Remuneration – Why And How Directors’ Pay Should Be Improved

Directors’ pay is too high in many cases and needs to be reduced. High pay is looking increasingly like it is politically unacceptable and this may lead to a backlash of business regulation that will be detrimental to investors.

UPDATE 13 June 2018

Why And How Directors’ Pay Should Be Improved