Second ‘Shareholder Spring’ unlikely to bloom in Europe

By Carmel Crimmins and Sinead Cruise, Reuters

DUBLIN/LONDON — While politicians and public have fulminated against lottery-sized pay awards in Europe’s boardrooms, fund firms, which wield the real power, are less concerned by such excesses and unlikely to use new powers to revolt on remuneration. Last year’s so-called “Shareholder Spring” against bosses’ salaries in Britain toppled few CEOs, and institutional investors typically prefer to keep battles with boards private. “Generally there is a reluctance among UK and European shareholders to vote against management,” said Louise Rouse, director of engagement with lobby group ShareAction. A rapid rise in boardroom pay at a time of dwindling average incomes and soaring unemployment has made remuneration a hot political topic, particularly in Europe, where taxpayers face years of austerity to help pay for bank bailouts. Germany’s ruling coalition, facing an election in September, recently agreed to give shareholders binding votes on bosses’ pay at listed companies, following the example of Britain and Switzerland, whose citizens this month forced public companies to give shareholders veto rights over executive salaries.

European Union member states and the bloc’s parliament, meanwhile, have finished draft legislation that will impose the world’s toughest limits on bankers’ bonuses.

Unlike the United States, where the law limits investor access to top executives and therefore encourages public spats at AGMs, European investors can — and prefer to — voice their opposition behind closed doors. And while the size of salaries and bonus packages paid to some executives has horrified the general public, investors are more concerned the award is in proportion with their returns. “Our job as asset managers is not to serve as arbiters on what is fair and not fair in a societal context,” said George Dallas, corporate governance director at F&C Investments. “There is a risk that as pay becomes subject to a binding vote, this can crowd out investor attention on other important issues, like strategy, risk, board composition and succession.” Scrutiny of Votes Last year, a number of high-profile shareholder votes against pay forced the departures of some well-rewarded CEOs, including Sly Bailey of British newspaper group Trinity Mirror and Andrew Moss of British insurer Aviva.