This year's round of general shareholder meetings is marked by investor interest in boardroom pay packages. In the United States in particular, shareholders have submitted 320 resolutions relating to executive and director pay. In an unprecedented turn of events, several resolutions have obtained over 50% voter support.
Even in the United Kingdom, where investors' calm is legendary, the steps taken by the representatives of major institutional investors, managers and consultants expressing outrage at "exorbitant" pay packages have resulted in especially stormy sessions. During the recent Glaxosmithkline general meeting, the company's remuneration report was rejected by 50.72% of voters, including ethos, primarily because of the "golden parachute" pay-off awarded CEO Jean-Pierre Garnier, the amount of which (£22 million) was deemed scandalous. Although other firms (Shell, Prudential, Reuters, Schroders, HSBC) have also been exposed to investor wrath because of the pay packages awarded to senior executives, this was the first time in British corporate history that a pay proposal from the Board of Directors was defeated. Although only advisory, these votes of defiance are a signal to Boards of Directors and management that shareholder tolerance for excessive pay, especially at a time of major financial upheaval and steady decline in share values, has reached its limit.
In Switzerland, shareholders do not have a direct say on corporate pay policy. If they wish, however, they can demonstrate their disagreement indirectly. ethos, for example, voted against the re-election of the Chairman of the Centerpulse remuneration committee because under his chairmanship the company established remuneration schemes authorizing repricing of options.
ethos also turned down proposals by the Boards of Directors of Centerpulse, Saia Burgess, Micronas, Jelmoli, Xstrata and Komax to create conditional capital for management profit-sharing schemes because the beneficiaries were too few in number and the capital reserved too high (Komax, Jelmoli, Saia Burgess), individual pay schemes potentially excessive (Xstrata), the exercise price had been reduced (Centerpulse, Micronas) or the period during which stock options could be exercised prolonged (Saia Burgess) to compensate for the fall in share prices.
