IF THE Shareholder Spring two years ago was a boardroom blockbuster, then the sequel looks like it could be an even bigger box office hit.
Investors were up in arms at AGMs all week, protesting once again at excessive pay that had such a star billing in the original round of demonstrations.
We all thought that an end to excessive pay was the denouement of a tale of recklessness that brought the financial system into disrepute.
Some big beasts were forced out of office in 2012 as shareholders made it known that the time for paying big bucks to those who failed was no longer acceptable.
But it wasn’t the end of the story. Big pay is back and, because those being rewarded clearly didn’t listen first time around, the protests are even louder.
Barclays suffered a humiliating backlash on Thursday when a third of shareholders rejected the bank’s remuneration report. Directors also faced revolts at meetings of pharmaceuticals firm AstraZeneca, the recruitment firm Sthree and publisher Pearson.
The stand-out case, however, concerned Royal Bank of Scotland which managed to get into a spat with its major shareholder – the Treasury – without the need to do it in public. UK Financial Investments, which manages the state’s 80 per cent stake in the bank, opposed plans to pay up to 200 per cent of salary in bonuses.
At the very least this shows an ongoing failure by those running the banks to grasp public outrage and exasperation at these payments. RBS and Barclays continue to argue that such incentives are required in order to avoid an exodus of staff. In fairness, both provided evidence that senior figures, particularly in the US, were leaving to join rival banks. But the arguments are less valid when those leaving have been part of two organisations that have overseen either a slide in profits, as at Barclays, or a colossal loss at RBS.
A notable sub-plot in Shareholder Spring 2 is that relations between companies and investors have become strained beyond the ballot. This is not simply a matter of voting against a motion on pay, it is being done publicly and with some venom. Barclays’ chairman Sir David Walker and the chairman of the remuneration committee Sir John Sunderland rebuked Alison Kennedy of Standard Life Investments for raising its objections in public, a rather odd position to take at what was, after all, a public event.
This issue, however, extends beyond the banks. As noted above, it embraces large companies in other sectors, though the objections tend to be for similar reasons: a decline in performance, a fall in profits. Bonus payments in such circumstances are seen by objectors as rewards for failure.
But are astronomical pay packages ever justified? Department store chain John Lewis has just paid its chairman Sir Charlie Mayfield £1.5 million which is 66 times the salary of the average member of staff, a paltry £13,700, which is barely a living wage. John Lewis is in good shape, so pay rises might be in order. But let’s not forget that this is the company that promotes the employee-owned model. I’ll bet some of those employees would like a bigger share of the company they “own”.