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Mind the gap: UK-listed multinationals that want to offer their managers US-style pay have gained greater understanding from investors this year. But executive pay remains a contentious issue. Equipment rental company Ashtead is the latest in the spotlight. It is seeking investor approval for a plan to pay its chief executive Brendan Horgan, a US resident, up to around $14 million.
The proposal has received the thumbs-up from proxy voting agencies ISS and Glass Lewis. Such findings tend to infuriate big business. Their attitudes toward proxy voting agencies range from “frustration and irritation at one end of the spectrum to militant hostility at the other,” according to a study based on the findings. Interviews with the FTSE 100 leaders.
One problem is that advisers have a double standard. Agencies support large packages in countries like the US, but frown upon them in the UK. Given that the UK’s biggest companies pay their bosses approximately one third Companies argue that Ashtead’s FTSE 100-listed share price is as high as its S&P 500 peers, making it difficult for the UK to compete for talented executives. discussed this week that its success depended on attracting and retaining high-caliber talent “who are residents of the United States.”
But there is no reason why a one-size-fits-all approach is more appropriate: proxy advisory firms tailor their recommendations to local rules or governance standards and to the views of investors – in other words, their clients.
The second complaint — that advisers are inflexible — has more weight, according to Suren Gomtsyan of the London School of Economics. There are, to be sure, exceptions. This year, Glass Lewis judged that Smith & Nephew had provided a “compelling justification” for paying more to its US-based leaders, although the ISS recommended against it.
This illustrates how proxy advisors take different approaches. Nearly a third of investors use more than one advisor. They often offer divergent opinions, especially ISS and Glass Lewis. In two-thirds of cases where one recommended voting against a report, the other made the opposite recommendation in 2022, according to a study. paper from the Financial Reporting Council of the United Kingdom.
Gomtsyan found in a study of 1,271 FTSE 100 pay voting proposals between 2013 and 2021 that more than 28 per cent of institutions almost invariably followed the advice of one of three voting advisers (ISS, Glass Lewis or Hermes EOS) on all pay votes, and these were often overseas institutions investing in the UK market as part of a diversification strategy. They were less likely to have strong views on the governance of individual companies.
Meanwhile, the influence of British institutions, which are less likely to rely on outside experts, has declined as their involvement in British stocks has shrunk. That gives agencies an important role. But blaming brokers’ recommendations for awkward standoffs over pay is nonsensical. In the end, it is investors, not advisers, who make the decisions.