Manifest Requisitions Say on Pay Resolutions

Manifest this week requisitioned a say on pay shareholder resolution at the Bank of Ireland and four more leading Irish listed companies: DCC; Elan; C&C Group; and Independent News & Media.

As the course of this year’s European proxy season has progressed, we have noted a marked lack of progress in Irish corporate governance arrangements. In light of the considerable sums of Irish government money being used to support the Bank of Ireland, we believe that it is particularly important for the democratic process to do all it can to protect shareholders interests.

As a shareholder of these companies we are exercising our right to propose the following resolution to the next available AGM: “To approve the Report on Directors’ Remuneration for the financial year ended DD MM YYYY” (where this is the financial year end of the company in question).

Our view is that shareholders should have the opportunity to record their satisfaction, or otherwise, with a company’s approach to the remuneration of their agents – the directors.

Neither the Irish Companies Acts nor the Listing Rules of the Irish Stock Exchange require companies to propose their Remuneration Report for shareholder approval. The Irish Stock Exchange previously adopted the UK’S 1998 Combined Code which recommended that directors should consider whether such a resolution should be proposed. The 2003 Combined Code removed this recommendation (in light of developments in UK company law) and although the Irish Stock Exchange adopts the current Combined Code, to date, not a single Irish incorporated company has voluntarily proposed a Remuneration Report resolution.

“We are disappointed that five years after the EU’s recommendation on directors’ pay, Irish companies have not taken this issue up on a voluntary basis” says Manifest’s research manager, Alan Brett. “Remuneration policy resolutions are common in The Netherlands and Sweden; as well as being standard items of AGM business in the United Kingdom and Australia. A number of leading Swiss companies voluntarily proposed advisory votes on the directors’ remuneration at their AGMs held during 2009 and North American companies are now seeing the benefits of giving shareholders a voice on this extremely important issue.” says Brett.

A voluntary say on pay offers a measured and shareholder-focussed approach to the issue of executive pay. The alternative would be less welcome with draconian measures such as those being discussed by politicians on both sides of the Atlantic – including salary limits which may actually damage shareholders’ interests. Informed engagement between investors and companies has been found to generally be very effective at preventing most ‘spats’ on executive remuneration issues, and an advisory vote facilitates this.

This is not a matter of picking on any one director or company and undertaking a “name and shame” exercise or to say that pay at any Irish company is excessive. Rather it is to say that the globally-dispersed shareholders of Irish companies should be able to express their views on remuneration issues at the AGM.

As for individual companies we will approach our analysis of the issues surrounding the resolution voting decisions as we would any European company working within either the EU recommendations or local laws. There will be no blanket recommendations but as usual we will prepare a thorough analysis of the issues and provide bespoke recommendations on each individual company based on customers’ individual policies.

Companies should have nothing to fear from this resolution as long as their remuneration practices are reasonable; policies clearly expressed; and quantum of pay set at a level which is acceptable to shareholders.

We very much hope that managements will recommend voting in favour of the resolution.

For more information please call Sarah Wilson or Alan Brett on +44 (0)1376 503500

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