What has been going on? Does it mark a watershed in investor behaviour? Or is it a reaction to growing political and public pressure to “do something” about boardroom excess? Are they simply trying to keep Vince Cable off their backs?
I suspect the truth is a bit more prosaic. When investors vote at company meetings, they generally do so on the basis of economic factors rather than political or other extraneous ones. When a company is doing well, investors will want to support the board and management.
Problems arise though when profits and performance are less good, when it is felt the company should be doing better, or where concerns start to surface about strategy. And they become a lot more acute if companies fail to communicate or listen. There have been many cases over the years where they have ended in a public dispute.
Exceptional season
Even so, the number of companies hitting the headlines in recent weeks has been exceptional. A common thread running through many of them is one of long-standing issues which have finally come to a head. Almost certainly the difficult economic and trading conditions, along with an insipid stock market, have played their part.
But I do not believe that we should in future look forward to an annual spectacle of humiliated boards and downed chief executives. And that is a good thing, because continuous upheaval is not in the interests of big companies, of the people who work for them, or of the ordinary investors whose savings have been invested in their shares.
Investors have sent a powerful message this year, serving notice that their views do matter, and it is one which I would expect companies to take to heart. The result is likely to be more dialogue with investors, not only on remuneration (rewards for failure and so on) but also on broader strategic issues before matters come to the vote. And that will mean less need to vote publicly against those running the company to which investment managers have entrusted their customers’ money.
More engagement
As evidence for this, I would point to the IMA’s latest report on Monitoring Adherence to the Stewardship Code, published this week. It is the latest in a series of similar reports that we have been carrying out since 2003. These have charted a steadily increasing volume of resource and activity devoted to stewardship of, and engagement with, UK companies.
This year’s report chronicles in detail the approach of shareholders to half a dozen prominent issues in the previous year. By no means all ended in a showdown at an AGM, but all yielded results in different ways.
Together with our findings about engagement processes and resources, the report paints a picture of active shareholding. This is business as usual for investors. It sometimes boils over into a public dispute. But nobody should assume that if there is less blood on boardroom carpets next year that means shareholders are being less vigilant. On the contrary, it will mean that healthy dialogue is in progress.
