The myth of a shareholder spring

Is the shareholder spring just a myth?

The disclosure that FTSE100 chief executives were last year awarded average total remuneration of £4.8m, a rise of 12%, will be seen by many as shocking.

It comes at a time when earnings for the vast majority of people are stagnating and represents a record of just over 200 times average total pay in the private sector of just under £24,000 (on latest figures from the Office for National Statistics).

Basic pay for the bosses of the UK's biggest companies rose 2.5%. It was the variable elements of pay - so-called long term incentive awards and deferred bonuses - that soared.

The authors of the report, the consultancies Manifest and MM&K, said the main problems with pay are in the largest companies, where directors' remuneration - while large in itself - is a small proportion of total costs.

The owners of companies have become increasingly concerned about what they see as excessive pay increases for directors, that are not justified by the performance of companies - and there has been a rise in the number of protest votes against remuneration practices at companies' annual meetings. Tomorrow WPP, the media giant, is expected to lose a vote on its pay policies.

Strikingly, though, a deeper analysis of this so-called "shareholder spring" of investor uprisings shows it may not really exist. There have been just four defeats so far of companies in votes on their so-called "remuneration reports", and only one of these companies has been in the FTSE100 list of biggest businesses. That does not represent an exponential increase in shareholder rebellions.

According to research also carried out by the corporate governance advisory group, Manifest, the average level of dissent registered in all explicit votes on remuneration was 11.7% - which was up from 9.6% in the previous year, but significantly below the dissent levels of 16% and 12.4% seen in 2002 and 2003 respectively.

In other words, the ambition of Vince Cable, the business secretary, to entrench a culture of greater engagement by investors in the management of business seems some way from being fulfilled.

It is understood, however, that Mr Cable is close to succumbing to pressure from the Association of British Insurers, among others, for new binding votes on companies' pay to take place only every three years, rather than annually. Mr Cable has been consulting on how the current annual votes on pay, which have only advisory status, could be replaced by votes with mandatory force.

Some will therefore accuse Mr Cable of taking the pressure off businesses on pay. But a colleague of his said Mr Cable thought three-year votes would "encourage more long-term thinking among companies, which is what we want".

That said, Mr Cable would want a provision whereby there would be an annual vote if there were "any substantive policy changes [on remuneration]".

The other striking element in today's report by Manifest and MM&K is a league table of the 10 highest paid FTSE100 executives on the basis of "total remuneration realisable" - which includes the value of previous years' long-term awards, such as share options, that have vested and can therefore be cashed in.

This shows Bob Diamond, the chief executive of Barclays, as the highest earner among the UK's corporate bosses, with total realisable pay of £20.97m. In second place was Sir Martin Sorrell of WPP - whose pay will be implicitly criticised tomorrow in a protest vote at WPP's annual meeting - with £11.6m.

In third place was AstraZeneca's David Brennan, with £11.3m, who recently retired early following criticism from shareholders of the company's performance.

Manifest and MM&K believe that Vince Cable's governance reforms may force all companies to disclose this single figure for realisable remuneration every year in their annual reports.