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Britain to Bolster Investors’ Say on Pay

Louise Lucas and George Parker, Financial Times

Plans to give shareholders more power over boardroom pay will be given centre stage in the Queen’s Speech, as highly paid executives face another week of lambasting from shareholders, the Financial Times reports.

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Vince Cable, business secretary, will announce plans in the ceremonial unveiling of the government’s programme for executive pay curbs in a wide-ranging enterprise bill, including giving shareholders in quoted companies an annual binding vote on executive pay policy.

However, he is expected to drop the most contentious element of the plan – a requirement for company pay policies to be backed by a “supermajority” of up to 75 per cent of shareholders – after opposition from FTSE bosses and investors.

William Hill, the gambling group, is expecting a roasting over its decision to award chief executive Ralph Topping a £1.2m retention bonus after the Association of British Insurers issued an “amber top” questioning his remuneration.

“I’m sure there will be a significant vote against [the award]. That’s abundantly clear,” said Gareth Davis, chairman, adding he was hopeful the resolution would be passed.

But he was adamant the board would stick by the commitment to award Mr Topping a retention bonus equivalent to 200 per cent of his salary, which was accompanied by a smaller reduction of other awards.

“One has to take shareholder views into consideration, that’s absolutely understood,” he said.

“We will face that bridge when we come to it, but a deal is a deal.” Mr Davis, who sits on the remuneration committee, added that under Mr Topping William Hill’s share price had risen 17 per cent last year, when the dividend was lifted 16 per cent.

This year so far shares are up 35 per cent.

“The reason for [making the award] is that this was a very important turnaround story so we are anxious to create space and time to enable an orderly and successful succession process to take place this time round. It went very badly last time round,” he said.

The uproar over salaries reached boiling point last week, when two chief executives quit and a third, Aviva’s Andrew Moss, faced calls to do likewise.

The revolt over pay, spanning Europe and the US, is due to continue at this week’s annual general meetings.

Executives at Cookson, the industrial ceramics group, are also braced for a possible showdown after Pensions Investment Research Consultants, the shareholder advisory consultancy, advised voting against re-election of the entire board.

Cookson rebuffed Pirc’s claims, saying the only real bone of contention with investors and corporate governance bodies revolved around the way total shareholder returns were calculated after its 2009 rights issue.

“Pirc’s views don’t seem to reflect wider market views of management performance,” the company said.

“Since early 2009 the management team has created over £1bn of shareholder value.” One investor body said the rising revolt over high pay matched with poor performance was gaining momentum.

“Investors want better alignment and better balance between the dividend payment, payment for staff and money going back into the company to be re-invested. And at the moment, that balance is out of kilter,” it said.

Last week’s revolts saw Aviva, the insurer, become the first FTSE 100 company in three years to have its pay plans voted down and led to calls for Andrew Moss, chief executive, to stand down.

That followed the resignation of Sly Bailey, chief executive of Trinity Mirror, also under attack over pay while David Brennan stood down as chief executive of AstraZeneca after pressure from shareholders.

WPP, the marketing group, is expected to face a tough annual meeting next month after awarding Sir Martin Sorrell, chief executive, a 60 per cent rise in total pay.