Self-interest at heart of investor uprising

LONDON BRIEFING:MANY OF us feel deeply uncomfortable with the phrase "shareholder spring". After all, raising your hand to abstain or vote against the board at an annual meeting held in a comfortable conference venue in London, before knocking back a couple of GTs, can hardly compare with facing tear gas and bullets in Egypt's Tahrir Square.

But, call it what you will, there’s an uprising among investors and it gathered pace yesterday as it claimed one of its biggest scalps to date. Just days after 60 per cent of Aviva shareholders failed to back the insurance group’s pay policies, Aviva chief executive Andrew Moss got the message and decided it was time to go.

Heaping on the humiliation, shares in Aviva leapt more than 5 per cent at one stage yesterday on news of his abrupt exit, adding almost half-a-billion pounds to the group’s stock market value.

Lest you feel too sorry for Moss, the blow of his departure will be softened by a payoff package in the region of £1.7 million (€2.1 million), made up by 12 months’ salary, a portion of his bonus and a contribution to his lucrative pension pot. Share schemes worth another £2 million-plus will not now pay out, however.

The Unite union weighed in to welcome Moss’s departure, saying it was an important step on the road to curbing greed in the boardrooms of the financial services sector. Unite national officer David Fleming highlighted the heavy job cuts made by the insurance group, particularly in Ireland, where its operations had been “decimated”, he said.

His thoughts were with the workforce, although Aviva shareholders were more concerned with their own returns.

Even as the City was marvelling at this latest example of shareholder activism, investors in William Hill, Britain’s biggest bookie, were also dealing their board a bloody nose. At issue was a £1.2 million “retention bonus” designed to keep its chief executive, Ralph Topping, in his post until at least the end of next year, but with no performance strings attached.

Proxy votes saw the bookie’s board avoid defeat over its remuneration policies by the narrowest of margins – 49.5 per cent of shareholders voted against the pay report, although it was then passed by a show of hands at the meeting. Including abstentions, some 52 per cent of William Hill shareholders failed to back the board.

Aviva and William Hill join the ranks of Barclays, where 31.5 per cent of shareholders refused to back the remuneration report despite some modest last-minute concessions from chief executive Bob Diamond, and Xstrata, where 40 per cent registered their disapproval.

Today shareholders in consumer goods group Unilever are expected to subject their board to hostile questioning on pay and bonuses, while on Friday it will be the turn of shareholders in gas group Centrica.

Two weeks ago, AstraZeneca chief executive David Brennan quit just hours before the annual meeting after prolonged shareholder pressure over the drugs giant’s underperformance. The departing chairman also brought forward his exit by three months.

Trinity Mirror chief executive Sly Bailey also decided not to wait for the annual meeting, to be held tomorrow. She announced her departure last week after a near 10-year tenure that has seen shares in the former FTSE 100 company crash from 390p when she took over in 2003 to around 30p now.

At Aviva, the shares have fallen by almost a third over the past year and by 62 per cent since Moss took over the top job in 2007.

Speaking at last week’s ill-tempered annual meeting, one disgruntled investor compared the company’s performance under Moss’s reign – revenue down 19 per cent, profits down 16 per cent and the dividend down 21 per cent – with a near-doubling of executive pay at the group over the same period.

This “shareholder spring” has been billed as a turning point on excess in the boardroom, but the reality is that it is more about returns for shareholders than about how much cash top executives can extract from a company.

Any action on overpaid executives is to be welcomed but it still seems that as long as investors are getting their share in the shape of a rising share price and generous dividends, then they are still willing to allow chief executives to rake in the riches.

It is only when investors are lagging behind their boards in this largesse that they turn really ugly. Self-interest rather than sacrifice or any lofty idea of finding a new way forward is at the heart of this remuneration revolution – another reason, perhaps, that we should think twice before glibly labelling it a “shareholder spring”.

Fiona Walsh writes for the Guardian newspaper in London