RUTH SUNDERLAND: Rebel shareholders need to yell louder against firms

The rebellions at this year’s crop of annual meetings – most spectacularly at WPP in Dublin this week – suggest shareholders are finally tackling overpaid executives.

But it is a decade after investors were first granted a say on pay, and we are still a long way from a fully-functioning shareholder democracy.

For a start, there is a growing but largely unnoticed trend for investors to  outsource their voting decisions to advisory groups.

Ruth Sunderland: Shareholders need to seize back the power from executives

Ruth Sunderland: Shareholders need to seize back the power from executives

These bodies include some well-known and respected bodies such as the Association of British Insurers and the National Association of Pension Funds, both established investor bodies.  Others include Pirc, Manifest and the US-based ISS.

These firms can provide a valuable service to help shareholders reach well-researched and informed conclusions.

But critics say they are not regulated and not accountable to anyone in particular, that they produce formulaic recommendations on voting, and that they gain self-publicity by goading clients into protest votes.

And in some cases, investors are using advisory firms as a way of totally outsourcing their voting decisions.

This makes a mockery of the whole idea of responsible share ownership.
Unless investors engage with companies themselves, they will be utterly incapable of steering UK plc towards better governance.

Large institutional investors are key here, because private shareholders now hold such a small proportion of the equity in large companies.


Big battalion investors need to start behaving like proper owners and seize back the power from executives who are, after all,  merely their employees.
Shareholders urgently need to grow some backbone.

Some harbour odd attitudes towards voting in the sense that they are reluctant to vote against a board even if they are very dissatisfied.

Most are still far more likely to abstain in a pay poll than to vote against, despite the fact their votes are merely advisory. Think about this in the context of political democracy and it is really quite extraordinary.

It is as if a Conservative supporter was reluctant to put a cross next to the Tory candidate in a General Election, in case it led to the party being elected.

The worry seems to be that protest voting could destabilise companies leading to a loss of value, but that is a very bad reason for failing to stand up to  arrogant and poorly  performing executives.

Investors have gained ground in this year’s Shareholder Spring, but they need to be much braver still if they are to make a dent on the excessive  pay culture spawned in Britain’s boardrooms.

There is no point giving them a binding vote on pay, as Business Secretary Vince Cable is considering, if they are too timid to use it.

And if they carry on running scared, then executives like Sir Martin Sorrell at WPP – who wrapped up his annual meeting to the defiant strains of electro-pop song Bulletproof – will continue to dictate their own terms.

Executives would not think they were bulletproof if investors stopped firing blanks. Then a more appropriate tune for over-paid and under-repentant bosses might be Yesterday.


IN the UK we are still thinking about the euro crisis in financial terms, of the impact on banking systems, sovereign debt and markets.

At the Mansion House dinner this week it was clear from talking to eurozone bankers that, in their circles, the debate has moved on the geopolitical level.

They are concerned that if Greece leaves the single currency following this week’s elections, then it will be unable to pay its police and army for long, and within a matter of months could become a failed and chaotic state.

Do Germany and France really want a failed state on their doorstep? Not only that, but one in the Balkans, a region with a very turbulent history?

And if the eurozone refuses to bail out Greece, will the Russians or the Chinese step in for strategic reasons of their own? The Russians have already been bailing out Cyprus, probably next in line to seek a lifeboat.
Germany, meanwhile, is deeply uncomfortable at being manoeuvred into the role of the eurozone’s financial enforcer, for understandable and good reasons.

The conception of the single currency owed more to a political vision of unifying a continent after the Second World War and the fall of the Berlin Wall than it did to any sensible economic rationale.

In the absence of a leader who can make that political vision come alive again, the single currency is not a uniting force – it is tearing Europe apart.

Ruth Sunderland is Associate City Editor of the Daily Mail

RUTH SUNDERLAND: Rebel shareholders need to yell louder against firms

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