Firms told to talk to shareholders about executive pay to avoid further revolts

No Pot Of Gold

Eight companies that have drawn shareholder protests over their bosses' pay for the past two years should open talks with investors to avoid a third year of rebellion, pension funds say.

The National Association of Pension Funds, which looks after £1tn of investments, also called for a better link between directors' pay and performance as it assessed the annual general meeting season, which is drawing to a close.

Pension fund managers listed eight companies that have had standoffs with investors for two successive years – easyJet, Capital & Counties Properties, bus and train operator FirstGroup, mining group Lonmin, outsourcer Mitie Group, online grocer Ocado, oil and gas group Ophir Energy and private equity company SVG Capital.

The association looked back at companies where at least 20% of shareholders failed to back bosses' pay last year followed by at least 15% withholding support this year – although it noted that easyJet and SVG each have a major investor leading the dissent.

For the first time this year companies were required to put two pay issues to a vote: the remuneration report, which showed how directors and staff were paid in the past financial year; and the remuneration policy, which sets how the directors will be paid over the next three years.

The vote on the former is advisory, so is only able to show the level of dissent, while the latter is binding, meaning a rebellion forces companies back to the drawing board to design new pay deals.

"To receive significant shareholder dissent on remuneration one year might be regarded as a misfortune, but to do so a second year really does not reflect well," said Will Pomroy, corporate governance expert at the association.

"We urge all those firms whose shareholders have so clearly signalled their dissatisfaction this year to begin in earnest a conversation to resolve the concerns well ahead of next year's AGM season."

The engineering firm Kentz was the first company in the FTSE 350 to have its remuneration policy voted down – it also faced dissent over its remuneration report – while FTSE 100 company Burberry had its pay report voted down.

The level of dissent is lower than during the so-called shareholder spring of 2012.

The association also tracked which companies encountered dissent on issues other than pay and found that nine in the FTSE 350 had experienced protests on a recurring resolution – such as an election of a director – and that four of them did so again this season.

Even so, the association found that investors showed "reticence" when it came to voting against individual directors, even when there were recurring issues.

Powered by Guardian.co.ukThis article was written by Jill Treanor, for The Guardian on Tuesday 16th September 2014 00.53 Europe/London

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