It’s being called a “Shareholder Spring” as investors rise up in anger at overpaid boards of directors, particularly those whose performance is not regarded as up to scratch. When Aviva, a U.K.-based insurance group, suffered a humiliating vote against its proposed executive-pay plan at its annual general meeting in early May, the damage to the company’s reputation was so great that the chief executive felt compelled to resign. It’s a story with lessons for any CFO whose role involves investor relations or whose pay deal is open to a shareholder vote.
What’s particularly embarrassing for Aviva, however, is that its own trade body, the Association of British Insurers, had previously issued what’s called an “amber top alert,” drawing attention to concerns it had about the pay structures at the company.
Worse than that, as an institutional shareholder itself, Aviva has taken a stance and voted on hundreds of other companies’ remuneration reports. In what might be regarded as a case of “Do as I say, not as I do,” the company’s own investment-management arm has passed judgment on companies across Europe and around the world, and yet not found it possible to put together a boardroom pay structure that could garner majority support from other investors.
CFO European Briefing has seen the voting records for Aviva Investors, Aviva’s investment-management arm, which has some £263 billion ($415 billion or 325 billion euros) assets under management. Our analysis shows that in the first half of 2011, the investor voted on 550 companies’ resolutions relating to remuneration reports, opposing 165 of them (30%) and abstaining in 51 (9%).
Most of the meetings at which Aviva voted against remuneration reports were in the United Kingdom. But it also declined to support more than two dozen pay reports in companies across Europe:
- In Switzerland, it voted against remuneration reports for Sonova Holding, Holcim, ABB, Credit Suisse, UBS, Swisscom, Schindler Holding and Geberit, Lonza Group, Mobimo Holding, Nobel Biocare Holding, and Societe Generale de Surveillance Holding. It abstained on the vote for Kuoni Reisen Holding.
- In Italy, Aviva opposed the remuneration reports at Banca Popolare di Milano, Davide Campari-Milano, Assicurazioni Generali, UniCredit, Lottomatica, and Italcementi. It abstained at Banca Monte dei Paschi di Siena.
- It also opposed remuneration reports at BBVA (Spain), C&C Group (Ireland), Colt Group (Luxembourg), and Wereldhave (Netherlands), while abstaining at BPI (Portugal).
However, one of the remuneration reports Aviva Investors supported a year ago was that of Aviva PLC itself. This week CFO European Briefing asked Aviva Investors how it decides how to vote on Aviva PLC resolutions and how it had voted at the controversial May 2012 annual general meeting. A spokesperson said it has “minimal holdings” in Aviva PLC and that “our fund managers don’t vote on Aviva stock,” which would appear to be a change from its policy at the time of last year’s general meeting.
(Editor’s Note: Since this article was first published, Aviva Investors has told CFO that its voluntarily published voting records are intended to cover decisions made by Aviva Investors on behalf of clients who have given Aviva Investors full discretion to make voting decisions. However, the record for its declared voting at Aviva plc’s May 2011 meeting was missing a footnote regarding the firm’s conflict of interest policy. This footnote, a spokesperson said, would have made clear that, because of a clear conflict of interest, Aviva Investors does not, in fact, vote at Aviva plc shareholder meetings other than as instructed by external clients. “Going forward, to avoid confusion, voting at our own parent company’s general meetings will not be included in our online voting records,” she said.)
Aviva Investors itself may not have cast any votes against the PLC’s remuneration report this year, but the resolution was ultimately defeated by a tally of 823 million votes against to 690 million votes for, with 152 million abstentions.
The voting record also shows the extent to which boardroom pay could soon become a pan-European issue that extends beyond the recent high-profile pay votes at Credit Suisse and UBS. Michel Barnier, the European commissioner for internal market and services, is planning to give shareholders in European Union companies a binding vote on pay as well as allowing them to set upper limits on bankers’ bonuses. In this, he is largely following in the wake of U.K. business secretary Vince Cable, who has indicated he would push for investors to have a binding vote on executive pay.
Andrew Sawers is editor of CFO European Briefing, a CFO online publication.