With CEO pay hitting new highs, has the shareholder revolt of 2012 been forgotten? Emma Cusworth investigates.
“It’s naive to think a CEO could single-handedly change the direction of a big company.”
Stefan Stern, High Pay Centre
History appears to be repeating itself. Only four years ago, the ‘Shareholder Spring’ saw record defiance votes at the usual round of AGMS for UK plc. Despite a few humiliating defeats for CEOs that year, 2016 sees another round of exorbitant pay packages on the table. And the rejections are starting to roll in.
Perhaps the most notable pay package is that of Sir Martin Sorrell, CEO of advertising giant WPP. Despite 60% of shareholders rejecting his pay packet in 2012, WPP is this year proposing to pay him an eye-watering £70.4m, a record high for UK plc. As the Local Authority Pension Fund Forum (LAPFF) pointed out in a 5 June statement, Sorrell’s pay has increased 56% per annum over the past five years, twice the year-on-year average increase in the company’s total shareholder return of 28.8%.
The High Pay Centre found that top pay is still rising more broadly for FTSE 100 executives, who enjoyed “single figure” pay rises in 2015 with some getting notably greater increases. Reckitt Benckiser’s CEO got more than £10m more than in 2014 while Shire’s CEO was paid over £12m more.
Meanwhile, the FTSE 100 is down nearly 9% year-on-year from just north of 6,800 on 10 June 2015 to just below 6,200 on 2 June 2016. Even over three years, arguably a more reasonable period over which to judge the effectiveness of a CEO, the index is down over 6% from around 6,600.
