The number of remuneration-related resolutions that received significant levels of dissent during the 2019 AGM season was at a five-year high, according to the Pensions and Lifetime Savings Association (PLSA).
In its AGM review published today (22 January) - which analyses voting behaviour from previous years - the PLSA reported that 55 resolutions for remuneration-related dissent at FTSE 350 AGMs had been submitted. This was the same number found in 2018 by the trade body, showing executive remuneration remains a "major concern" for pension scheme shareholders.
The report showed that average pay for FTSE 100 chief executives had increased from around 40 or 50 times that of the average UK worker in the mid-1990s to 117 times the average worker today.
However, for the end of 2018 financial year, the median FTSE 100 chief executive pay fell by 13% to £3.46m. This was accompanied by a number of firms deciding to "head off" investor dissent by proactively reducing bonuses, executive pension entitlements, or overall salary in advance of the 2020 AGM season.
The report also found that with the introduction of climate change disclosure regulations in October last year - which compel schemes to pay greater attention to ESG risks and report on how they take these matters into account in their statement of investment principles - there was more of a focus from scheme investors on ensuring ESG and climate change issues formed a key consideration in their investment and stewardship strategies.
The PLSA said it believes resolutions relating to climate matters could increase, following the growth in policy and public scrutiny in this area.
The trade body recommended that pension schemes should seek to work with their managers and advisers to judge the impact of climate risk on their portfolios. It added it's 2020 voting guidelines will include further "practical tips and details" to help schemes to do so.
Investment and stewardship policy lead Caroline Escott pointed out that the PLSA has "long argued" that pension funds should use their votes to encourage companies to "behave responsibly" on issues such as executive pay, or to "consider the implications" for their business models and strategies of climate change.
She said: "As long-term investors, pension funds are ideally placed to encourage companies to behave in a way that ensures sustainable business success. We would also urge scheme investors to use the 2020 AGM season to hold directors individually accountable on issues of continued concern - doing so can be a powerful tool to effect change."
She added: "However, it is important to remember that voting is only one way for schemes to engage and make their views known on issues of concern. We would encourage pension schemes to consider how to best make use of the full array of engagement tools, including seeking additional meetings with company management, or collective engagement with other investors."
The analysis forms part of the PLSA's AGM Voting Review that has been published ahead of the updated PLSA Voting Guidelines for the 2020 AGM season, due out in the next few weeks. The guidelines set out voting best practice for pension funds or their asset managers to use and support positive progress on the issues highlighted in the report.
