Governance in focus: When annual meetings become forums for confrontation

The annual general meeting provides an opportunity for shareholders large and small to quiz the executives behind ‘their’ companies. They are often highly charged and occasionally violent affairs.

Sir Martin Sorrell, the founder and chief executive of WPP, has faced shareholder revolt over his pay. Peter Nicholls / Reuters
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LONDON // It is midsummer in the United Kingdom and it is not just the social season that is in full swing.

For the corporate world, there is the annual meeting season to endure.

Every year, all of the companies listed on the UK’s stock market are obliged to hold a gathering where shareholders can come and ask questions of the executives and generally take the management of “their” company to task.

In the next week or so, two of the UK’s most scrutinised companies will hold their annual general meetings – Tesco and the Argos owner Home Retail Group, which will soon be swallowed by Sainsbury’s.

This month, IAG, the owner of British Airways, and WPP, the world’s biggest advertising company, took their turns.

For the media, there is usually only one story to focus on: that of executive pay. In the UK in recent years, opposition has been increasing to executive rewards that are deemed excessive.

Banks, miners, energy groups and housebuilders have all been in shareholders’ sights this year, as investors say that the rewards executives are receiving are out of kilter with company performance and the general economy. By June 8, no fewer than 21 leading British companies had faced a significant rejection of remuneration policy.

Back in April, the annual meeting season kicked off with a protest against the £14 million (Dh75.2m) pay package of Bob Dudley, the chief executive of BP, followed quickly by a slightly smaller rebellion against the pay of Iain Conn, the chief executive of Centrica, the owner of British Gas.

Weir, the Scottish engineering group that supplies the oil and gas sector, saw more than 72 per cent of its shareholders vote against its proposals to bring in a lucrative pay scheme for ­executives.


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Also this month, a third of investors in WPP voted against its chief executive’s record payout of £70m. Sir Martin Sorrell will still receive his rewards, however, as this vote, like that at BP and others before it, was non-binding.

Sir Martin’s pay will now face a binding vote at next year’s AGM, when investors agree a new remuneration scheme. The asset manager Hermes, a 1.2 per cent shareholder, said before the vote that it would not be supporting the remuneration package because it had concerns about the “remuneration committee’s apparent lack of vigour and stress-testing”.

To be significant, a protest has to be led by an institution. In practice, the institutional shareholders rarely turn up but their displeasure is expressed to the company in the form of a vote against, or abstention from, the remuneration policy.

Meanwhile, at the actual meetings, companies are increasingly being targeted by “professional activists” who try to create stunts, which can be filmed and spread online. Greenpeace, the environmental organisation, holds training events to teach campaigners how to conduct such stunts.

People still talk about Cedric the pig, the 20-stone pig who turned up at British Gas’s 1995 annual meeting in London’s Docklands as part of a protest against the controversial chief executive Cedric Brown’s pay.

G4S, the security firm, has seen its annual meetings descend into chaos for the past two years, despite a heavy security presence. In 2015, the company’s supply of security and screening equipment to the Israeli security services dominated a meeting during which only a small number of the questions from the floor focused on its financial performance.

The aerospace company BAE Systems has had similar protests for years, while miners and oil companies routinely face protests from environmental groups. This year BAE held its annual meeting in Farnborough in Hampshire, about 50 kilometres from London, which is close to some of its offices but is also hard enough to reach to deter less determined activists.

In 2009, cabin crew unions brought cages of live lemmings to British Airways’ annual meeting in protest over job cuts and pay freezes.

“Central London venues are preferred by shareholders, but if companies say they are going to ‘tour’ their annual meeting, you can be sure it is to try and deter people from coming,” says one company communications adviser.

If anyone has been asking questions about sustainability, the supply chain, fair tax policy or pay during the year, then the AGM is the opportunity for people who care strongly to make their point.

“The challenge with AGMs is that an individual with a particular gripe can stand up and say something explosive, without receiving much scrutiny about whether it is justified or not. The more colourful the language, the more likely it is to be reported,” says Giles Croot, the director of communications and investor relations at the UK infrastructure multinational Balfour Beatty.

Some companies are so concerned about the activities of certain groups that might target their meeting that they use private investigators to monitor what they get up to, sometimes to the extent of infiltrating the groups themselves.

Watching the social media activities of known campaigners is another way to prepare for disruption, as they typically put their escapades and stunts online.

Drax, the power station operator that burns both coal and compressed wood pellets to generate some 8 per cent of the UK’s electricity, has been a target of protesters for the past decade.

At its most recent AGM in the City of London in April, about 20 shareholders came into the meeting, about two thirds of them protesters with either a single or proxy vote.

The crowd outside carried banners and home-made dinosaur puppets – their message was that Drax was a dinosaur.

Past attempts to disrupt Drax meetings have included a shareholder who came in wearing a Velcro suit, which he planned to rip off to reveal his bear costume – the message was that Drax was preventing bears from doing what they would naturally do in the woods.

He was not successful.

There is always a visible security presence at the company’s meetings and it has a close relationship with the City of London police.

Andrew Brown, the director of communications at Drax, is wary of talking about some of the protesters’ stunts but admits he is sometimes impressed by their creativity.

“We don’t allow people to grandstand: they have to ask a question and then we try to respond in as much detail as we can. The sustainability of our operations is fundamental to the success of our business. We have nothing to hide and welcome any opportunity to correct the misinformation which exists about our sourcing of wood pellets.”

But the one thing that really engages or enrages shareholders is a little more prosaic than return on investments or environmental issues: food – particularly the lack of it.

In April in Germany, police were called to the DaimlerChrysler annual meeting after a fight over free sausages turned ugly.

The company served about 12,500 sausages to the 5,500 shareholders at the meeting for lunch, alongside bread rolls, wraps, potato soup and potato salad, followed by cake in the afternoon. But a female shareholder was unhappy that one man was taking more than his fair share. The chairman of the company, Manfred Bischoff, concluded: “We either need more sausages or we get rid of them altogether.”

It is a solution that most British companies adopted a while back.

Marks & Spencer infuriated its shareholders when it swapped a lavish buffet for a goody bag containing £6.59 worth of refreshments a few years ago.

These days, shareholders at many firms are lucky to get a biscuit and a cup of tea.

“I don’t see why we should pay what is effectively a special dividend for shareholders who live within the M25,” says one director of communications.

“We don’t want to encourage them to linger,” says another.

Indeed, why would pampered executives on mega-salaries want to endure the wrath of disgruntled shareholders any longer than is strictly necessary?