Comment: Shareholder spring not quite a damp squib

MAYBE last year’s “shareholder spring” was more than transient wind and fury after all. A new survey shows that bosses’ bonuses, or “compensation” as the banking industry preciously calls them, have fallen 7 per cent so far this year compared with 2012.
Martin Flanagan. Picture: Adrian LourieMartin Flanagan. Picture: Adrian Lourie
Martin Flanagan. Picture: Adrian Lourie

On average, chief executives in FTSE 100 companies have received two-thirds of their maximum bonus entitlement in 2013, compared to a high of three-quarters last year, according to PwC.

It is the second consecutive year that executive bonuses have fallen across this index and the next echelon of publicly quoted businesses, the FTSE 250.

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The report suggests British boardrooms and remuneration committees were unmistakably jolted by the firestorm of shareholder rebellions in the spring of 2013 that saw high-profile remuneration packages thrown out or derided.

Among chief executives to fall on their swords in the process were Andrew Moss at Aviva and Sly Bailey at Trinity Mirror.

The data in the PwC report indicates big companies have decided they don’t need the opprobrium of scathing public revolts by shareholders against loosely generous remuneration policy, and have toughened up the performance criteria for annual bonuses and long-term incentive plans (LTIPs).

This is welcome, particularly as suspicions grew that bosses were winning by hook or by crook, making up in LTIPs and “golden hello” payments when they joined whatever they might lose on annual cash and shares bonuses.

Corporate remuneration and shareholder value got well out of kilter across a stream of industries, from banking and pharmaceuticals to defence and media. The shareholder spring was a welcome douche of cold water into that complacent corporate face.

Perspective is needed, however. Footsie chief executives have still received average bonuses of £905,000 this year, which, buttressed by a blue-chip basic salary, should ensure their families continue to shop at Waitrose and John Lewis rather than Aldi and Poundland.

And, knowing the innate conservatism of most fund managers, alfresco investor rebellions won’t totally displace the quiet word behind closed doors to management that many institutions instinctively favour as a modus operandi.

But a start had to be made to at least water down the gravy train that taints British business and suggests it is riddled with hypocrisy on pay.

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It is good that there seems some evidence that the shareholder spring was not just a dog’s bark and the caravan did not move on completely unconcerned.

Bank of England cools off its ardour for QE

So, the minority of Bank of England policymakers previously arguing for more quantitative easing (QE) have backed off, the monetary policy committee minutes for this month’s meeting reveal.

After the recent flurry of strong economic data, covering both the dominant services and smaller manufacturing sectors, cooling feet on QE were to be expected.

Inflation is still comfortably above the mid-term target. So why should BoE governor Mark Carney and his colleagues risk extending how long they breach their fundamental remit of price control when the economy seems to be doing nicely enough without more monetary stimulus?

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