The Lemon Fool

Seems a minor revolt on Direct Line (DLG )

2.
To approve the Directors' remuneration report
For
766,710,834
76.58%
Against
234,492,835
23.42%
1,001,203,669

72.81%

Votes witheld
7,284,313

Our 2017 Directors' remuneration report has been approved by shareholders with 76.58% of votes cast in favour of the resolution. Naturally we are disappointed not to have received a higher level of support for the resolution, but having engaged with our shareholders, we understand their specific concern. We welcome feedback from our shareholders and we will continue to actively engage with them on executive remuneration and other issues

This is surely a good thing. The remuneration levels for many companies have been getting quite out of hand, and although the Directors apparently talk to consultants all that happens is I think if they do not like what they hear they just find another one, a bit like Audit Reports. It is not difficult for the consultants and the auditors for that matter to suddenly see the Directors' point of view.

Whether or not that is the case if we get enough negative votes on remuneration from a cross section of companies maybe the Directors will be able to see that they need to curb their enthusiasm a bit.

Dod

If I were to develop that a bit further, Directors are in theory put in charge by the owners (the shareholders) Sometimes Directors can be shareholders but quite often the bulk if not all of their shareholdings come from share awards and whatever the merits of the lock ups and so on that cannot be quite the same thing as an outside shareholder who has had to part with his hard earned cash to buy his shares.

The Directors have a fiduciary duty to look after the assets of the Company. That is not an option, that is enshrined in law. Their appointment is not supposed to be an opportunity for enrichment. Persimmon is a case in point where the culture seems to me to be all wrong. Some on this Board seem to take the view that it does not matter; we are getting our reward but that is a bit like the fund manager who charges 1.5% against the next who charges only half that.

I think we all need to take more interest in such matters.

Dod

Dod101 wrote:I think we all need to take more interest in such matters.

Dod

I vote against every remuneration policy for every company I own.
Director pay has got out of hand.

In the case of AIM recruitment minnow RTC, 38% of votes cast at the AGM were against receiving and approving the remuneration report (after the directors awarded themselves options over 13% of the company to go with their fat salaries) and the motion was only passed because of the votes the directors held themselves, but as far as I can see nothing came of it as a result of it.

However even the votes of those in favour amounted to only 26% of the share register. 58% of the share register didn't vote. Unless 'owners' get off their backsides and do something, nothing is going to change.

SteMiS wrote:Unless 'owners' get off their backsides and do something, nothing is going to change.

Indeed, but for anything much to change, not just that has to happen: the various systems that prevent beneficial owners from voting need to be got rid of. As the most obvious example, nominee brokers should be obliged to allow their clients to vote their shares, and (highly) preferably, not just to allow it, but to actively offer it to them (*). And voting should preferably be a standard part of the service, without extra charges, and at the very least be subject to only strictly capped charges.

The problem is of course money. It should be possible to develop broker systems that very cheaply collect clients' votes online and forward them to the companies, but developing those systems will cost a significant amount of money, and they will require a certain amount of maintenance thereafter. So they do have a cost, especially to get started - and brokers quite naturally will resist the idea of incurring that cost...

Also, with a large fraction of equity holdings held in funds rather than as individual shareholdings, something similar would need to be done to give their beneficial owners (rather than the fund managers) the right to vote the shares concerned. But I'm afraid I've little idea of how that could be done in a practical way. :-(

(*) They are actually already obliged to allow it for shares held in ISA accounts, but I think it's a pretty safe bet that most holders of shares in ISA accounts are completely unaware of the fact that they can vote them, and even if they became aware of it, would have to feel pretty strongly about an issue to take on the hurdles that most nominee brokers place in the way of them doing so...

Gengulphus

You are absolutely right, Gengulphus. Some platforms (IWeb for one) don't even inform shareholders when important events are coming up, e.g. the EGM re the AIM cancellation of TRE's AIM listing until after the event so no possibility of voting.

Yes, agreed. Well said.

I must admit my broker does give me the opportunity to vote - at least for my US holdings - but on the basis that my 100 shares or whatever are unlikely to make a difference rarely do so. I need to rethink.

Pendrainllwyn

Pendrainllwyn wrote:Yes, agreed. Well said.

I must admit my broker does give me the opportunity to vote - at least for my US holdings - but on the basis that my 100 shares or whatever are unlikely to make a difference rarely do so. I need to rethink.

Well, in a general election your one vote is unlikely to make a difference - but if everybody thought that way and didn't vote, it most certainly would make a difference! So it's a sort of self-defeating argument...

The difference from a general election is the fact that some have more votes than others because of having bought more shares or having got others to sign their voting rights over to them (by e.g. investing in a fund or agreeing to some nominee brokers' terms & conditions). So some people's votes are much more likely to make a difference than others. Some people having more votes than others strikes me as reasonable when it's due to having more invested, or at least not very avoidable: one can hardly expect that when people come together to set up a company, with some putting much more money into it than others, it will be acceptable to the larger investors that the smaller investors have just as much say on how it's run. But some people having more votes than others because they've had voting rights signed over to them does not strike me as very reasonable - certainly in political elections, it's only acceptable on a very small scale (through voting by proxy) and on the basis that the signing-over can be cancelled without serious consequences. Of course, influencing people's votes is accepted on a large scale and quite effective - a lot of people are pretty staunch supporters of one of the parties and will normally vote pretty automatically for their party's candidate - but the party cannot actually do the voting for them and they can change their minds about how they're voting whenever they like.

Not certain where these thoughts are leading me, and I'm extremely sceptical that we would actually end up going there even I did have a clear idea where "there" was! But it would be interesting if the consequence of directors deciding on remuneration so high that it hit the headlines were a massive surge of beneficial owners of shares in their company grabbing back control of their votes and voting the remuneration package / policy down.

But I'm afraid I'm pipe-dreaming, as that would be real shareholder democracy...

Gengulphus

You never know things might change.

The carillion story is hitting the headlines with some pretty harsh (but justified) language about directors and auditors.

Fund managers and the like presumably vote but do you suppose the likes of IWeb vote on behalf of all their clients, without consulting them? I do find it annoying that a company says it is writing to all shareholders about some important issue and in fact I am told nothing.

In the case of AIM recruitment minnow RTC, 38% of votes cast at the AGM were against receiving and approving the remuneration report (after the directors awarded themselves options over 13% of the company to go with their fat salaries) and the motion was only passed because of the votes the directors held themselves, but as far as I can see nothing came of it as a result of it.

However even the votes of those in favour amounted to only 26% of the share register. 58% of the share register didn't vote. Unless 'owners' get off their backsides and do something, nothing is going to change.

I have a few shares in RTC still. It seems to me that although the company is expected to grow over the next couple of years, particularly in light of the large SSE contract, the board are basically taking all that growth for themselves leaving little for the rest of the shareholders. The three members of the board that were granted these options are pretty well remunerated anyway for running a small company and took home over three quarters of a million pounds between them last year.

Also it upsets me that these are nil cost options.

The main reason I haven't sold is that the shares are still on a very low multiple of earnings, but if they rose a bit I would probably be happy to get out, for one thing I have a bit too much in recruiters right now having recently bought some GATC.

Personally i'd rather they put the business up for sale than go on a debt fuelled acquisition spree, I think that could deliver far more value to shareholders but I don't expect that to happen.

IMO Govt. legislation is the only answer as regards egregious bonuses and incentive schemes because I think it is expecting too much for the average voter to go out of their way to access the details of incentive schemes, understand how they work (not all that easy) and go through the hoops of being able to vote on them. It certainly seems that in many cases the shareholders carry most of the risk because they have paid for their shares and the management and to some extent other employees get most of the rewards.

This rebellion at Quarto was presumably not solely, if at all, about directors' remuneration but it shows that voting can make quite a difference, if you have substantial holdings at any rate:

https://www.quarto-ir.com/content/media ... 170518.asp

It will be interesting to see what the press says about this. Things have been pretty dire at Quarto so let's hope this mini-coup achieves some improvement.

It will be interesting to see what the press says about this. Things have been pretty dire at Quarto so let's hope this mini-coup achieves some improvement.

Almost certainly not about Director's remuneration, it appears that the old guard that got Quarto into the mess they're in until being ousted by Chris Miils have retaken control with a bit of help.

Personally i've never seen the point in investing in them, they seem to report a big headline profit but never generate much cash. They're up to their eyeballs in debt too. I guess the only reason you might want to have a punt is beacuse of the fairly low psr and the effect the gearing could have in an improvement in trading.

Not for me.

No way I would be buying now either. I have held for some years and am currently showing a loss. I think I bought as a result of reading Lord John Lee's enthusiastic comments which was in the days of the original regime under Orbach IIRC. He may have a few words to say about the coup in FT Money. I wonder if he still holds. As I said, hopefully things may buck up now, not before time. Apologies for straying OT somewhat.