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Benedicte Hautefort’s Column

UK Investor Relations hot topic : only 53 FTSE executives bonus have ESG criteria, really ?

As IR and legal departments are now heading to 2024 shareholder meeting preparation, Scalens looks at the stakes by country, starting this week with the UK. Scalens data cover all FTSE 100 issuers considering the index composition up to now.

Strong shareholder support to UK corporates

Although UK dissident shareholders are very vocal in the media, shareholders support is actually higher for UK corporates then elsewhere.
Dissident resolutions are less frequent than in the other countries though – only 5 in total to date, and gaining maximum 20% support, when US, France and Germany see several dissident scores above 30%.
Moreover, narrow-scores resolutions (below 80% approval) are only 2% of total in the UK, vs. 5% in average on Scalens 13 countries coverage

Higher pay and more independence for UK Boards

Investor support for directors is still very high, in the UK like in all countries – 97% average, 2 points higher than in the US for example. Board member profile and performance is similar in many points to the other countries : 10 board members, 8 meetings per year, close to 100% attendance, 60 years in average and 38% women on Board. It differs in two important aspects : for a comparable company size, UK Board members are significantly more paid (+72% in average), independent board members accounts for more than 60% of total and often more than 66%, when the average is 45%.

Also higher pay for executive, but ambivalent attitude on ESG criteria

Say-on-Pay approval rate for executive team is also still very high in the UK, at 91%, and average and support levels on prospective compensation policy is back up to 90% after a drop to 85% last year. This is remarkable as UK executive are among the highest paid in the world, just after the US. Investors do not factor in the fact that gender diversity is very low in the UK executive teams, less than 15% when the European are above 23%.

The most distinctive feature in UK investor relations dialogue is the ambivalent stand towards ESG. Only 53 corporates of FTSE 100 have included ESG criteria in the compensation policy, when it is 82% in total Europe and US – compulsory by law in most European countries and highly recommended in the US. But on the other hand, when UK companies do include ESG metrics, they account for higher than anywhere else : 19.5% of the annual bonus award and 9.5% of the long-term incentive plan (LTIP) award. This compares to 15% of annual bonus for French executives, 12% in Germany and US. Health and Safety and employee satisfactions are the first ESG indicators for annual bonus, Greenhouse gas reduction impact mostly performance shares attribution.

As Climate performance becomes more and more important for investors, we at Scalens think that the big change in 2024 in the UK will be the progression of these ESG criteria.

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