Company boards under far greater scrutiny as investor activism rises

Directors of stock-market-listed firms are facing greater investor pressure, with a 29 per cent rise in shareholder votes against board members seen this year, new figures show.

The report from Thomson Reuters also revealed that a growing focus on climate change has led to the number of climate-related resolutions treble at FTSE 350 firms as shareholders place ever-greater focus on environmental, social and governance issues (ESG). There were 16 climate-related shareholder resolutions seen in 2021, compared to only five tabled in 2020 and just three in 2019.

In total, 42 directors were subject to “major dissenting votes” against their re-election in 2021 compared to 30 in 2020.

The growing focus on climate change issues is seeing more ESG-related resolutions being put to shareholder votes. Picture: Peter Summers/Getty Images.

There has also been a fall in votes received in favour of director salaries in FTSE 350 annual remuneration reports, from 94 per cent of votes last year to 91.6 per cent this year.

Analysis by PwC shows chief executive pay in the FTSE 100 has fallen by almost 10 per cent in the past year following increased focus on pay levels from shareholders.

Hilary Owens Gray, director of practical law at Thomson Reuters, said: “Those who run the UK’s largest companies are finding themselves under increased scrutiny from investors. Shareholders are becoming more vocal in making sure companies set sensible remuneration targets for directors and address how they are going to play their part in tackling climate change.

“With investors placing increasingly greater focus on ESG criteria, if companies don’t map out how they are going to meet expectations on [this], we can expect the trend of heightened shareholder engagement to only increase further in 2022.”

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