The so-called “shareholder spring” uprising against executive pay packages is fostering a shift in investor power and communications, according to a study by FTI Consulting.
Shareholder rebukes at companies including Citigroup, Barclays and AstraZeneca this year have reverberated in the U.S. and Europe with the prodding of institutional investors.
FTI polled 170 global institutional investors, finding demand for more annual input on compensation, increased communications, and a larger say in governance.
“Investor focus on executive remuneration is not confined to a few high-profile cases nor to a single region or market,” said Mark Kenny, managing director of FTI’s strategic communications practice, formerly FD.
Eighty-eight percent of investors polled said executive pay is important to their decisions, while 62% want an annual “say-on-pay” vote. Sixty-seven percent said they want disclosure of specific performance targets for so-called variable compensation fo execs.
FTI’s study found investors are starting to use their voting power to communicate to companies their dissatisfaction with performance and to urge companies to better align pay with performance and shareholder returns.
FTI found that 72% of investors think a vote opposing compensation below 30% is enough to warrant a corporate response, with 15% saying 10% is enough of a threshold. FTI notes that historically companies would get votes surpassing 90% for most resolutions.
Investors are also urging boards to put on more road shows and investor meetings, bucking the norm of written communications with shareholders. FTI found 92% of investors said companies need to put on governance road shows with major shareholders and 58% expect shows once a year.
Kenny noted that road shows aren’t just for companies under fire or marketing a significant resolution. He added: “[Road shows are] increasingly seen as best practice even in circumstances where there are no perceived governance issues or contentious resolutions for the annual meeting.”
FTI’s survey, conducted from mid-April to early May, covered investors in Europe, North America, Asia and Latin America.