| Most firms' annual general meetings
(AGMs) owe more to North Korea than ancient Greece. By long-standing tradition,
bosses make platitudinous speeches, listen to lone dissidents with the air of
psychiatric nurses towards patients and wait for their own proposals to be
rubber-stamped by the proxy votes of obedient institutional investors.
According to Manifest, a shareholder-advice firm, 97% of votes cast across
Europe last year backed management. So should corporate democrats be cheered by the rebellion over pay at Royal Dutch Shell? At the oil giant's AGM on May 19th, 59% of voting shareholders sided against pay packages for top executives. In particular they disliked 4.2 million ($ 5.8 million) in shares dished out to five executives, which comprised about 12% of their total pay for 2008．Under the firm's rules, such awards should be granted only if Shell's total return in the year is in the top three of its peer group. In 2007 and 2008, Shell came a very close fourth, so the firm decided to pay out anyway. Shell is hardly a poster child for malfeasance: it is performing well, its pay is similar to that at other big oil firms and its shareholders previously gave directors discretion to bend the rules. They have used it to cut pay in the past. Still, although the vote is not binding, it is seriously embarrassing. The turnout was decent, at about 50%, and several big fund managers were clearly furious. The payouts have already been made and probably cannot be reversed, but Shell will be in disgrace for a while. Jorma Ollila, its chairman, said he took the vote "very seriously" and promised to "reflect carefully". After GSK, a British drugs firm, had a rebellion on pay in 2003, it completely redrew its pay policy. It is not just Shell that is facing unrest. Rough markets and a wider political uproar over pay have fuelled discontent across corporate Europe. Almost half of the voting shareholders at BP, another oil giant, failed to support its pay policies in April. At Rio Tinto, a mining firm with a habit of digging holes for itself, a fifth of voting shareholders rejected its remuneration policy. So far this year 15% of votes cast on pay in Britain have dissented, compared with 7% last year. In continental Europe owners are grumpy, too: in February almost a third of voting shareholders at Novartis, a Swiss drugs firm, demanded the right to approve its remuneration policy each year. But taking bosses to task for their ever-escalating salaries is not a substitute for keen oversight of performance and strategy. At Royal Bank of Scotland, which had to be rescued by taxpayers last year, 90% of voting shareholders rejected its pay policies last month. Yet back in August 2007, 95% of them ticked the box in support of the acquisition of ABN AMRO, the deal that brought the bank to its knees. |