By Tommy Wilkes
LONDON European shareholders are increasingly contesting corporate executive pay reports, data showed on Wednesday, as investors unhappy with companies' approach to environmental and social issues vote against director remuneration.
The percentage of remuneration reports disputed by investors across seven countries reached 42.9% during the 2023 annual general meeting season, the highest in at least five years, according to an annual review by shareholder engagement firm Georgeson.
Daniele Vitale, Georgeson's head of governance UK & Europe, said limited environmental and social resolutions meant shareholders were using pay reports to voice dissent. Georgeson defines a vote as contested if at least 10% of votes are against.
"There is also a perception that some companies have used ESG metrics in pay to make it easier for executives to meet payouts," Vitale told Reuters.
Investors increasingly want companies to incorporate environmental and social factors, such as greenhouse gas emission cut commitments, into their business strategy.
Switzerland saw the highest proportion of contested resolutions on remuneration reporting, at 68.4%.
The UK had the least, at 20.2%, but its percentage has been rising and is up from 16.2% in 2021, Georgeson found.
Opposition to executive pay looks likely to increase too, as big asset managers including BlackRock and State Street adopt so-called devolved proxy voting rights to end investors, who may vote differently from institutional shareholders, said Domenic Brancati, Georgeson's global chief operating officer.
Georgeson found that the percentage of disputed resolutions on remuneration policy dropped to 29.2% from 34.8% in 2022.
Resolutions on remuneration reporting differ from remuneration policy by typically being advisory rather than binding. Pay reporting votes also tend to be offered annually.
The proportion of contested director election resolutions reached 11.7% from 11.2% in 2022, the review showed.
European shareholders remain reluctant to vote against directors because it is considered more confrontational, Vitale said, but he expects that will change as investors' environmental and social concerns grow.
The number of "Say on Climate" resolutions - votes giving shareholders a say on firms' climate strategy - fell to 24 from 36 last year but was up from 12 in 2021, Georgeson said.
(Reporting by Tommy Reggiori Wilkes; Editing by Alison Williams)
