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New UK Public Register names and shames corporate governance offenders

Over one in five companies in the FTSE All Share index received at least 20% shareholder votes against a resolution at their 2017 AGM, or chose to withdraw a resolution. And executive pay remains a key issue for investors, with 38% of resolutions that in 2017 received significant votes against or were withdrawn related to annual remuneration reports, remuneration policies or other remuneration related resolutions.

This information comes from the Investment Association’s newly published Public Register of listed companies who have faced significant shareholder rebellions or withdrawn resolutions. As part of its response to the 2017 consultation on corporate governance reform, the government asked the IA to proceed with putting together the Public Register. The aim is to highlight companies which have received significant votes against a resolution, or withdrawn a resolution, and how they have responded to shareholder concerns.

The requirement to explain how a company intends to respond to votes against a resolution has been part of the corporate governance landscape since 2013. Substantial reforms to the directors’ remuneration reporting (DRR) regime introduced then included a requirement for companies who received a significant vote against a remuneration resolution to publish the reasons for that vote and the actions the company intended to take to respond to shareholder concerns. The DRR regime did not specify what “substantial” meant, but guidance published by the GC100 stated that it should mean at least 20% of votes cast against. This figure is proposed to be formally adopted as part of the changes which the FRC is consulting on making to the Corporate Governance Code.

The Public Register is likely to be a useful barometer for all issues on shareholders’ radar, both in the executive remuneration sphere and beyond, as it lists all affected resolutions and not only those related to remuneration. And it will be very useful for anyone looking to write their next article on Fat Cats!

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About this Author

Liz Pierson, attorney, Squire Patton Boggs

Liz Pierson is a partner in the Tax, Strategy & Benefits Practice. She advises on executive remuneration and incentives issues for both public and private companies. Liz has experience in advising on corporate governance issues relating to remuneration and incentives, remuneration for financial institutions and on the impact of corporate transactions on share plans (e.g. IPOs, takeovers, rights issues). She also has significant experience in advising on incentives for private equity portfolio companies, including acquisitions and disposals, incentives for management...

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