Key points
- Investor opposition to executive pay plans at Europe’s largest listed companies jumped 23% this year.
- 37.9% of companies faced opposition to their remuneration plans of over 10%, up from 30.7% in 2022.
- Spain saw the biggest increase in opposition, with over half of the votes contested.
- Concerns cited include premature vesting of long-term incentives and insufficient shareholding requirements for executives.
Investor unrest over executive pay packages at major European companies has surged in 2023, reaching a new high according to data released by corporate governance consultants Georgeson. The number of firms facing significant opposition (over 10% of votes against) to their remuneration plans rose by nearly a quarter compared to the previous year.
A total of 37.9% of major companies across nine key European stock markets encountered this level of opposition, significantly higher than the 30.7% recorded in 2022. This indicates a growing dissatisfaction among investors regarding executive compensation structures.
Notable examples of companies facing substantial pushback include InterContinental Hotels Group in the UK and UniCredit in Italy, both of which received less than 70% support for their pay plans. This heightened scrutiny reflects a shift in investor behavior, with a more direct and assertive approach to challenging executive pay.
For the first time, opposition to *future* pay policies – which can directly influence a company’s compensation strategy – surpassed opposition to past pay reports.
Spain experienced the most dramatic increase in opposition, with over half of the votes on executive pay plans being contested. While the UK, home to Europe’s largest stock market, saw a 25% rate of material opposition, the trend was widespread, impacting six of the nine markets analyzed, including Belgium, Germany, France, and the Netherlands.
The increased scrutiny isn’t just a matter of principle; it signals a growing expectation for stronger ties between executive compensation and company performance.
The concerns raised by investors are consistent. Louise Dudley of Federated Hermes highlighted issues such as long-term incentive awards vesting too early and insufficient shareholding requirements for senior executives.
Yousif Ebeed of Schroders emphasized the critical need for “sufficiently stretching performance targets and clear alignment between executive pay outcomes and company performance” as key factors for gaining investor support.
This trend suggests a growing demand for greater transparency and accountability in executive compensation, with investors increasingly scrutinizing the fairness and effectiveness of such plans.
