Investors, including pension funds, which voted against the high salaries of FTSE companies in 2016 have made an impact, the Investment Association has revealed.

Analysis of the 2017 AGM season by the Association found that investors are effectively holding FTSE 100 and FTSE 250 companies and their individual directors to account on executive remuneration.

For example, many FTSE 100 companies who saw large shareholder votes against pay in 2016, have on the whole submitted more conservative pay policies in 2017 for their executive teams, which were more in line with shareholder expectations. These policies were up for their three-year renewal this year and rebellions on all remuneration resolutions in the FTSE 100 were down from 14 in 2016 to nine in 2017.

In contrast, FTSE 250 firms saw dissent amongst shareholders double from 2016 levels, with 29 companies seeing votes with more than 20 per cent dissent, up from 15 in 2016.

The 2017 AGM season was a particularly crucial year for listed companies, since most had to renew their remuneration policy which was voted on for the first time with a binding vote in 2014, following the introduction of new government legislation in 2013. This policy is renewable on a three-year term and shareholders must now consider the renewal of executive pay proposals for the next three years until 2020.

Furthermore, the season also saw a new trend of several FTSE 350 companies withdrawing resolutions on executive pay packages ahead of shareholders voting, due to concerns over significant investor rebellion.

Commenting on the findings IA CEO Chris Cummings said: “Data from the 2017 AGM season shows that investors are flexing their muscles and holding big business to account. Executive pay amongst the UK’s largest companies is starting to decline to a level more in line with shareholder expectations.

“There is still some way to go, but a strong signal has been sent to boardrooms around the country that investors won’t tolerate rewards that are out of line with company performance and have concerns about executives’ spiralling pay. Well-run and well-performing companies that yield long-term shareholder returns are critical to ensuring that British savers and pensioners are able to lead more prosperous lives into their later years.”

In addition, Business Minister Margot James said: “The UK’s largest companies are showing encouraging signs that they are listening to shareholders and wider concerns about executive pay. But with an increase in the number of shareholder rebellions at FTSE 250 firms over bosses’ pay packets - we cannot afford to take our eye off the ball.

“Our responsible business reforms, which will be published shortly, will improve boardroom accountability and enhance our reputation as one of the best places in the world to work, invest and do business.”

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