• At Kemp Little, we are known for our ability to serve the very particular needs of a large but diverse technology client base. Our hands-on industry know-how makes us a good fit with many of the world's biggest technology and digital media businesses, yet means we are equally relevant to companies with a technology bias, in sectors such as professional services, financial services, retail, travel and healthcare.
  • Kemp Little specialises in the technology and digital media sectors and provides a range of legal services that are crucial to fast-moving, innovative businesses.Our blend of sector awareness, technical excellence and responsiveness, means we are regularly ranked as a leading firm by directories such as Legal 500, Chambers and PLC Which Lawyer. Our practice areas cover a wide range of legal issues and advice.
  • Our Commercial Technology team has established itself as one of the strongest in the UK. We are ranked in Legal 500, Chambers & Partners and PLC Which Lawyer, with four of our partners recommended.
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Shareholder Spring 2.0: AGM activism increases over executive wages

This year’s season of shareholder gatherings has seen the largest amount of shareholder activism in the last four years; again, company owners’ ire is centred on executive pay.

Examples of the current shareholder spring include:

  • the defeat of the remuneration report at Smith & Nephew by 53% of shareholders thus vetoing a proposed vesting of the chief executive’s LTIP despite the company not reaching its targets;
  • the unprecedented decision by BP shareholders to rebel against a 20% pay rise for its chief executive, with 59% voting against the increase, following a year in which the company booked a $5.2 billion loss;
  • over 40% of Anglo American shareholders voting against the company’s 2015 pay report; and
  • the shareholder revolt at Foxtons over the proposal to award its chief executive a 19% increase in his basic salary, to £550,000 per year, and an uplift of his maximum bonus to 150% of pay during a period in which the company has seen sharp declines in its share price.

Investors state that the current structure of executive pay results in poor alignment of interests between executives, shareholders and the company and there should be more focus on simplifying pay packages, greater use of salaries and ensuring that equity incentives include minimum holding periods.

There is speculation that prolonged grievance amongst shareholders could result in the government and regulators intervening to cap executive remuneration in the private sector. In 2013, the government introduced legislation requiring companies to hold legally binding votes every three years, with executive pay packages needing the approval of more than 50% of shareholders. The first round of these binding votes will occur in 2017.

In addition to voting against resolutions, as was the case in the activism examples given above, the Companies Act 2006 (Act) allows shareholders to express their grievances at how a company is being run though a number of other means. Some of these rights are:

  • section 319A of the Act allows shareholders holding voting shares in a company whose shares are admitted to trading on a regulated market to require the board to answer a question relating to the business of the meeting;
  • section 303 of the Act enables shareholders representing 5% of the paid-up voting shares in a company to require that the company calls a general meeting;
  • shareholders can also use section 303 to put forward resolutions at a general meeting the shareholders have convened (members of public companies can also request that a resolution is considered at an AGM (sections 338-340));
  • section 314 of the Act enables certain shareholders to require the company to circulate a statement of up to 1,000 words to shareholders relating to a matter referred to in a proposed resolution or other business to be dealt with at a meeting;
  • in certain circumstances, removing, or blocking the appointment, of a director; and
  • bringing an unfair prejudice claim under section 994 of the Act for relief where the company’s affairs have been or are being conducted in a manner that is unfairly prejudicial to the shareholders’ interests generally or the shareholder, or certain shareholders, specifically.

With the prevalence of shareholder rebellion at AGMs this year, will we soon see some of these more pointed tactics being used by aggrieved shareholders in some of the UK’s largest companies?

For further information, please contact John Alder.

The article above, current at the dates of publication, is for reference purposes only.It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.

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John Alder