Clifford Chance

Remuneration-related resolutions have faced more opposition from shareholders than other types of resolution so far this AGM season. This is partly due to UK plcs proposing new remuneration policies to remain competitive with their US peers, with pay packages pushing the boundaries of market practice in the UK to date.

WHAT WE’RE SEEING

Recommendations from proxy advisers such as Institutional Shareholder Services (ISS) to vote against remuneration-related resolutions are not fatal. All but one of the resolutions examined below were ultimately approved by shareholders, although often by significantly smaller margins compared to previous equivalent votes. The main sources of objection - whether on advisory votes on director remuneration reports or binding votes on director remuneration policy - were pay quantum and structure of long-term incentive. However, objections tended to be in the context of company-specific reasons, such as current financial performance.

WHAT WE’RE HEARING

We are aware that shareholders are showing more engagement and willingness to discuss remuneration proposals. Yet some remain sceptical of material changes unless it is clear how these align with the company’s specific needs and strategies. Companies and their remuneration committees are increasingly prepared to accept a degree of dissent if they are confident that the changes are right for the business, including ultimately for shareholders.

WHAT WE’RE THINKING

Companies considering making substantial changes to executive pay should undertake significant proactive and early engagement with shareholders. Votes against remuneration reports and policies should be viewed in context and need not raise alarm. Boards should feel confident in making changes next AGM season provided that these can be justified. Investors are more willing to accept that US peers and pay packages form a significant part of a UK plc’s competitive landscape where the business has a major US footprint. However, companies looking to match US levels of pay or incentive structures still need to have a broader justification than simply benchmarking, including as to how any proposed changes further company strategy and foster long term growth. It is key for companies to decide what is right for them, their stakeholders and their executives, taking into account the broader market environment.

THE IMPACT OF PROXY ADVISERS’ RECOMMENDATIONS ON REMUNERATION VOTES

Download the PDF below, where we examine a sample of cases where proxy advisers recommended that shareholders vote against remuneration reports and/or policies put forward by UK plcs during the 2025 AGM season. The table shows whether the relevant resolutions were ultimately approved, and compares the voting outcome to the most recent equivalent vote.