ANOTHER pay revolt, this time at fashion house Burberry, where young chief executive Christopher Bailey had his wings clipped in spectacular style on Friday.
Next in line to face the inquisition will be Tim O’Toole, chief executive of transport company FirstGroup, who will be questioned by shareholders this week about his own remuneration.
But does anything really change? After the angry exchanges from the floor and maybe some hand-wringing by the chairman, there follows a flurry of headlines and public outrage, but the bosses get their cheques anyway as most of these votes are non-binding.
The bankers and utility bosses have all suffered pelters for rewards that are deemed out of line with the levels of pay of the vast majority of those working for them. Even John Lewis, the feted “employee-owned” company, is hardly a model of virtue when it comes to pay. Chairman Sir Charlie Mayfield’s £1.5 million remuneration may be a reward for the company’s strong performance but it is 66 times the salary of the average member of staff who earns a paltry £13,700 – barely a living wage.
A positive development is that these protests are no longer confined to the private shareholder and the general public. Friday’s revolt saw almost 53 per cent of Burberry’s investors vote against Bailey’s package and that includes a lot of institutional influence.
It was the first such “defeat” of a FTSE 100 company for two years, the last being Sir Martin Sorrell, who heads the advertising giant WPP. It was also only the sixth occasion when a company from the leading index lost a vote on pay since 2002, when shareholders were given the right to vote on remuneration.
Since then we have had the famous shareholder spring of 2012 which brought the issue to a head.
Apart from WPP, other companies to suffer a backlash that year included Aviva, Cairn Energy, Centamin, Central Rand Gold, Cookson and Pendragon.
However, the notion that shareholders were rising up in revolt proved to be something of an exaggeration. Pirc, the research consultancy, found that of a sample of 300 annual meetings in the first half of that year the average vote against remuneration was 7.64 per cent against 6.1 per cent in the previous year.
Later research from KPMG showed that the level of protest was actually lower than in 2011. According to KPMG’s research, ten companies in the FTSE 100 witnessed significant levels of shareholder dissent on remuneration report votes in 2012 against 34 in the previous year. More significant than the overall numbers was that a small number of protests were against high-profile figures and were increasingly linked to performance. Aviva’s Andrew Moss was among the biggest scalps.
This link between pay and performance has been the biggest breakthrough. While some chief executives continue to earn whopping salaries and other perks, their remuneration in increasingly wrapped up in incentive schemes designed to ensure they only pay out if the boss delivers. The issue then is whether these schemes set tough enough targets amid suspicions that some are too easily achievable.
Four seasons in one economic forecast
NEVER let it be said that the newspapers are only interested in bad news. A glance at last week’s headlines offer a variety of positive developments across all sectors of the economy. So does that mean the good times are here again?
After the long downturn we seem to have got beyond the green shoots stage with some areas of the economy now nearing full bloom, though we should not ignore the odd weed in the flowerbed.
Scotland’s prospects are looking brighter than for some time with corporate activity picking up and deal flow increasing. Faroe Petroleum struck oil in the Norwegian North Sea, drugs firm ProStrakan splashed the cash on its biggest acquisition yet and law practice Brodies reported a fourth year of growth. That was just Friday’s news, and all very upbeat.
But, as ever, there is a need to tread cautiously before declaring that everything in the garden is rosy. There were signs of a weakening in UK construction in the three months to May, giving rise to concerns that the recovery has lost momentum and that some of the more optimistic GDP forecasts may have to be trimmed a little. There was also a surprise slump in factory output and a wider trade deficit than had been expected. The pound is stronger than many exporters would like.
As with a lot of data, these figures may represent a blip and there was other data last week showing that construction activity rose sharply in June.
The consensus is that confidence is higher and a survey due out tomorrow is expected to show that private sector growth in Scotland is quickening along with the rate of job creation. The numbers will be the latest to be seized on by both sides in the independence debate and will also feed in to decision making at the Bank of England. The conflicting messages about slowdowns and surges in growth must be playing havoc with forecasting and the timing of any tightening in monetary policy. «