When Royal Mail shareholders cast their votes on directors’ pay last week, the results will have sent shivers through boardrooms across the country.
An astonishing 70 per cent of votes cast at the annual general meeting went against the directors’ remuneration report.
Their concerns had been flagged, major shareholders had asked that the report be voted down, but the scale of the revolt was almost unprecedented.
Royal Mail’s Swiss chief executive Rico Back is far from the best-paid boss on the FTSE 100.
Yet this hasn’t stopped him being caught up in the surge of shareholder revolts sweeping through many industries, prompted by executive pay and performance as well as company strategies.
This summer of discontent at plcs has yet to fully engulf the construction industry, but there are already small signs of unhappiness which could grow if performance weakens at some of the biggest firms.
Of the shareholders who cast a ballot, 14 per cent voted against Balfour Beatty’s remuneration report in May.
Chief executive Leo Quinn had a base salary of £800,000 in 2017, but is also incentivised against measures such as share price performance and compensated for shares he lost by leaving his old job at Qinetiq.
Balfour’s executive directors will have KPIs on three performance measures next year for their bonuses: profit before tax (accounting for 40 per cent); cash (35 per cent); and strategic business and personal objectives (25 per cent).
Are shareholders likely to kick up more of a fuss? Balfour’s dividend rose from 2.7p to 3.6p per share last year and while Mr Quinn’s total remuneration is eye-watering, Balfour’s trajectory is on the up from the basket case he inherited.
Elsewhere, all eyes are on Interserve’s recovery.
The former Sodexo boss leading Interserve, Debbie White, has a base salary of £767,000 for 2018, which is second only to Mr Quinn.
At Interserve’s AGM in June, 17 per cent of votes cast were against approving the annual report on remuneration.
Shareholders might not care for the size of the pay packet, but they’re unlikely to raise objections if Ms White can turn around Interserve’s performance.
Ms White doesn’t qualify for our league table of the top 20 best-paid plc execs, having only joined Interserve in September last year. It’s also worth noting that not one of the 20 highest earners is female.
Meanwhile at companies like Kier (whose dividend rose from 64.5p to 67.5p), Morgan Sindall (35p to 45p) and Costain (12.7p to 14p), the pressure will be on to deliver continual growth and improvement in performance at a time when uncertainty is rife with Brexit looming.
But remember, Carillion handed out more than £700m to shareholders in dividends over less than 20 years up until its collapse in January, not to mention its handsomely rewarded directors.
When things go awry at plcs, it doesn’t tend to be the directors that get hit the hardest. And the savviest of leaders get out while the going is (relatively) good.
But further scrutiny is around the corner. For starters, the political inquest into Carillion’s collapse won’t die down any time soon.
And in January, Wates chairman James Wates was asked to lead a corporate governance review by the government and last month he published a ‘governance principles for large private companies’ consultation. A final report will be released later this year.
Companies will also be forced to publish the pay ratio between their highest and lowest earners from 2019.
Royal Mail’s shareholders have set the cat amongst the pigeons. Construction bosses will be hoping to avoid any P45s arriving in the post.