ABI: Institutional Voting Information Service review

The ABI’s Institutional Voting Information Service (IVIS) review, published today, shows that serious breaches in governance led to a much higher vote against companies in 2009, than even 12 months ago.

IVIS does not provide voting advice but indicates concerns through a colour code system. Following a red topped report, which indicates a matter of serious concern, an average of 30% of shares were not voted in favour of management last year compared with 13% in 2008.

Of all reports published in 2009 12% were red, 20% were amber and 68% were blue, indicating no areas of major concern. The review also found that executive pay inflation slowed last year with base salaries for FTSE 100 Chief Executives rising by 5.3%. Average bonus payouts were also down to around 90% of base pay compared with over 110% in 2008.

IVIS has reviewed voting issues at over 8500 FTSE All-Share meetings since January 2000, in line with guidelines on governance, sustainability and remuneration. These guidelines are set by the ABI Investment Committee, which includes many of the largest investors in UK plc shares. IVIS subscribers hold 30% of the FTSE All-Share.

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Peter Montagnon, the ABI’s Director of Investment Affairs, said:

“Welcome signs of restraint continue with 51% of FTSE 100 companies having now frozen base pay for their chief executives, but it is also clear that shareholders are ready to signal their impatience with companies whose remuneration approach does not take account of the impact of the economic downturn. This mood appears likely to continue in 2010. Given the strong public focus on remuneration, it is more important than ever that companies develop policies which are properly focused on linked pay to performance in delivery of agreed strategy.”

Five company reports on remuneration were voted down by investors in 2009. They were Bellway, Provident Financial and Punch Taverns , which were red-topped by the ABI, and Royal Dutch Shell and RBS, which were amber-topped.

ENDS

Notes for Editors

1. Enquiries to:
Erfan Hussain 020 7216 7411 (Mobile: 07712 841 184)
Kelly Ostler-Coyle 020 7216 7415 (Mobile: 07968 364 302)
Nicholas Burke 020 7216 7392 (Mobile: 07725 245 841)
Malcolm Tarling 020 7216 7410 (Mobile: 07776 147 667)

2. The ABI is the voice of the insurance and investment industry. Its members constitute over 90 per cent of the insurance market in the UK and 20 per cent across the EU. They control assets equivalent to a quarter of the UK’s capital. They are the risk managers of the UK’s economy and society. Through the ABI their voice is heard in Government and in public debate on insurance, savings and investment matters.

3. The breakdown in number of red, amber and blue tops since 2004:

2004 2005 2006 2007 2008 2009
Blue 60% 62% 63% 64% 68% 68%
Amber 30% 28% 27% 26% 22% 20%
Red 10% 10% 10% 10% 10% 12%

4. IVIS does not provide voting advice to investors, but indicates concerns through a colour code system:
Red top: Matter of serious concern; breach of guidelines
Amber top: Issue for shareholder judgement
Blue top: No areas for major concern

5. An ISDN line is available for broadcasts.

6. More news and information from the ABI is available on our website, www.abi.org.uk