LONDON -- When Sir Martin Sorrell, chief executive of international ad agency WPP (LSE: WPP.L ) , had his 6.8 million pound pay package overwhelmingly rejected by shareholders at last week's annual general meeting, was it thrown out? No, because in an appalling injustice, shareholders in U.K. listed companies don't actually get any say on how much they pay the people who work for them. Any vote is advisory, and executive fat cats can still decide for themselves how much to take to line their own pockets.
But that is all going to change, as Business Secretary Vince Cable is set to announce the introduction of mandatory pay votes.
They're our millions!
As shareholders, we should be concentrating on trying to make our own millions, rather than being forced to hand them out to underserving bosses. And if you don't think that's really possible, have a look at the Motley Fool's free report, "10 Steps To Making A Million In The Market" -- it just might surprise you. So this news has to be good for us.
The plan will see companies listed on the FTSE 100 (INDEX: ^FTSE ) and the London Stock Exchange's other indexes being forced to hold a shareholder vote on executive pay every three years. Once decided, remuneration packages must be adhered to for the next three years, or else a new vote must be called. Companies must also publish a simple annual statement of executive pay, unlike many who issue near-impenetrable remuneration reports that make things anything but clear.
Shareholders are revolting!
It has taken a long time and a number of shareholder revolts for this to come about.
Other companies have seen rebellions without actually losing their vote. Barclays (NYSE: BCS ) notably saw more than 30% of its shareholders failing to support its pay package in April, with protestors gathering outside its AGM to decry big executive pay awards when the share price is dwindling.
Bookmaker William Hill (LSE: WMH.L ) also came close to serious embarrassment last month when almost half of its shareholders rejected its plans for a 1.2 million pound bonus for boss Ralph Topping that was not linked to his performance.
There have also been revolts at miner Xstrata, which has seen its share price slide, and at struggling Premier Foods, whose shares are down more than 60% in the last 12 months. And shareholder discontent at Trinity Mirror finally forced out deeply unpopular boss Sly Bailey after her pay had soared while the shares tumbled 90%.
The answer to our problems?
So will the new rules put an end to all of this? Well, there will still be shareholder discontent from time to time, but we will finally have the power to do something about it, rather than having to sit back and be fleeced. Some will be disappointed by the three-year cycle and would prefer such a vote every year, but it may be good to start with a longer-term perspective and minimize knee-jerk actions. And at least top bosses will finally be accountable to those who pay their wages.
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