Investors ire on companies

European investors on Thursday rebuked companies including Aviva Plc, UBS AG and Inmarsat Plc for failing to keep executive pay in check with stock performance. Shareholders voted down Aviva’s compensation report with a 54 per cent majority while 37 per cent of investors opposed UBS’s pay plan and 40 per cent opposed Inmarsat’s planned executive pay. The average vote against UK compensation reports was six per cent last year, according to Pension & Investment Research Consultants Ltd.

“We’re living in a different environment,” said a spokesman for PIRC. “Companies need to recognise that fact and engage seriously with shareholders.”

“The difference this time is that more people are becoming as engaged and as vociferous and as active on this issue as we have been,” Tim Breedon, CEO of Legal & General Group Plc, the biggest investor in the UK stock market, said on a call with reporters on Thursday. “The collective leverage is far greater. That’s got to be a good thing.”

 

Four years of stagnant or negative economic growth since the financial crash coupled with the European debt crisis have pushed companies’ compensation committees to award executives bonuses based on operating performance rather than total returns to shareholders. Aviva plans to amend the “dislocation” between stock price and executive pay in future, said Scott Wheway, head of the insurer’s compensation committee. UBS Vote
About 54 percent of Aviva’s shareholders voted against its executive pay plan even after the London-based company pledged to consult more widely in future. The figure is for a preliminary proxy vote filed at its annual general meeting on Thursday and isn’t binding.

Almost 37 percent of UBS shareholders voted against the bank’s compensation report for 2011 at the annual meeting in Zurich, eight months after management announced a $2.3 billion loss from unauthorized trading. The loss led to the departure of CEO Oswald Gruebel, 68, and the appointment of Sergio Ermotti, 51, as his replacement at Switzerland’s biggest bank.

Ermotti, who joined UBS on April 1, 2011, as the head of business in Europe, the Middle East and Africa, received 6.35 million francs ($6.9 million) in compensation for 2011, including a 4.6 million-franc bonus.

Inmarsat, a London-based satellite services company valued at 2 billion pounds, said 40 percent of shareholders voted against its pay plans. At Premier Foods Plc, owner of the Hovis bread and Bisto gravy brands, 26 percent of investors voted against the directors’ compensation report.

Moss Under Pressure
“We could and should have done more to engage with shareholders,” Aviva’s Wheway, former CEO of Best Buy Co.’s European unit, said before the insurer’s vote. “Aviva won’t be taking the same approach to recruitment awards again,” and will “actively consult” with shareholders, he said.

Aviva CEO Andrew Moss, 54, is under pressure from investors to improve returns after the stock dropped 58 percent since he took over in July 2007, making it the worst performer in the nine-member FTSE ASX Life Insurance Index over that period. While U.K. competitor Prudential Plc grew in Asia, Aviva focused its resources on Europe just as the sovereign debt crisis gathered pace in 2009.

Moss last week waived a salary increase of 5 percent to 1 million pounds for 2012 after some shareholders said the company’s performance last year didn’t warrant the rise. Investors also requested a pay review of new executives following the firm’s decision to award U.K. head Trevor Matthews 470,000 pounds in cash and 2 million pounds in shares after joining from Friends Life last year.

A new pay plan will make sure “even if operational targets are hit we don’t have the dislocation with the share price described this morning,” said Wheway. “I would like to apologize to any shareholder that feels their views have not been adequately represented in the decisions we have made,” said Wheway. Aviva Chairman Colin Sharman also apologized “on behalf of the board.”