Britain’s biggest firms halt ballooning executive pay to stave off shareholder rebellions

File photo of a general view of office workers in central London as FTSE 100 companies bring down pa

File photo of a general view of office workers in central London as FTSE 100 companies bring down pay packets for their executive teams amid fears of shareholder unrest. Photo: Philip Toscano/PA Wire - Credit: PA

Shareholder rebellions are leading some of Britain's biggest listed firms to rein in bloated executive pay.

FTSE 100 companies have 'listened and acted' to shareholder concerns and issued 'more conservative' policies for their executive teams in 2017, according to data from the Investment Association.

The move resulted in a 35% drop in the number of remuneration proposals which were rejected by more than 20% of shareholders, compared with 2016.

Investment Association chief executive Chris Cummings said: 'Data from the 2017 AGM season shows that investors are flexing their muscles and holding big business to account.

'Executive pay amongst the UK's largest companies is starting to decline to a level more in line with shareholder expectations.'

Data released by the High Pay Centre think tank and the Chartered Institute of Personnel and Development (CIPD) earlier this year found that the pay packages for FTSE 100 chiefs were already falling last year – averaging £4.5m, down from £5.4m in 2015.

Shareholder revolts swept FTSE 100 firms in 2016, when the bosses of mining giant Anglo American, advertising behemoth WPP and oil major BP all faced investor backlash over swelling pay.

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Nearly 60% of BP shareholders voted against a 20% hike in Bob Dudley's pay at the oil giant's 2016 AGM after the group posted its largest annual loss for at least 20 years and axed thousands of jobs worldwide.

BP subsequently slashed Mr Dudley's pay package by 40% and his maximum earnings by 3.7 million US dollars (£3m) over the next three years – a move that proved popular among investors.

Likewise, Imperial Brands – the company behind Davidoff and Lambert and Butler cigarettes – also moved to stub out a potential shareholder rebellion by withdrawing plans for a bumper pay rise for chief executive Alison Cooper.

But other firms like luxury retailer Burberry have charged on with growing pay, prompting nearly a third of shareholders to vote against a generous payouts that include a £5.4m share award for former boss Christopher Bailey.

The Investment Association's study also found that FTSE 250 companies failed to calm shareholder fury over pay this year, resulting in a 100% jump in companies seeing 20% of votes cast against their remuneration resolutions this year, while FTSE 350 firms suffered a 400% jump in votes against re-electing company directors.

'There is still some way to go, but a strong signal has been sent to boardrooms around the country that investors won't tolerate rewards that are out of line with company performance and have concerns about executives' spiralling pay,' Mr Cummings said.