A common feature of all four FTSE100 DRRs voted on so far is…?

Any guesses?

If you’d said that all four DRRs were followed by clarifying addendums, you’d be right. If you’d said that all four addendums had been issued following “discussions with shareholder representatives”, you’d be absolutely correct. And if you’d said that all four had sought to clarify the companies’ recruitment policies (as explained in the DRRs), you’d be spot on.

Yes, all four FTSE100 companies that have held an AGM this year have had to follow up the release of their DRRs with a separate publication. So that’s Aberdeen Asset Management, Imperial Tobacco, TUI Travel and Compass Group, with all “further information” releases looking to clarify or limit the way in which a new executive director would be remunerated.

The details of each company’s communications, and the AGM votes, are set out below but, briefly, what’s the moral of the story so far?

Well, it’s clear that shareholders are particularly concerned about the flexibility that these companies originally sought on recruitment. The companies had detailed a position which would give their Remuneration Committees what they believed was an appropriate amount of discretion on recruitment remuneration, but it seems their shareholders disagreed with where the boundaries of this discretion should lie.

These four companies probably deserve some sympathy, having been the first out of the blocks in this new DRR regime and, as such, having no lead to follow. No doubt the companies still drafting their new style DRRs will have monitored the reception of the first few policies closely, and will be expected to have learned quite a bit from this process. It may be that future disclosures of what shareholders believe is excess discretion are met not just by a demand for clarification, but by a stronger display of disapproval in the AGM vote.

easyJet and Sage Group are holding their AGMs shortly (13 February and 6 March respectively) and haven’t (as yet) released any documents that supplement their DRRs. Does this mean shareholders are happy with the current disclosures? We will report back on the results of the votes and let you know.

• Aberdeen Asset Management’s further information clarifies that, if a new executive was appointed and subsequently terminated, an amount in respect of annual bonus would only be awarded “in exceptional circumstances such as ill-health, and would not apply in circumstances of poor performance”. Certainly more restrictive than the wording in the DRR. Aberdeen Asset Management’s January AGM saw an 88.8% backing of the implementation report, with a slightly lower approval of the remuneration policy (at 86.3% of the votes).
• Imperial Tobacco took the opportunity to confirm that any arrangement specifically established to recruit an individual would take the form of performance-related variable remuneration, with the value capped at the awards foregone at his or her previous role. The note goes so far as to state that the company “does not envisage a cash payment such as a ‘golden hello’ would be offered”. Imperial Tobacco’s AGM, held on 5 February, saw shareholders support both the implementation report and the remuneration policy, with votes in favour of 92.6% and 88% respectively.
• TUI Travel’s additional information saw the company cap the Committee’s level of discretion on recruitment so that, whilst variable remuneration is limited to 575% of salary (as set out in the DRR), the discretion in respect of a one-off cash or share-based award on recruitment would never be exercised in a way that would see the total maximum of variable pay exceed 725% of salary (excluding buy-out awards). In addition, the note confirms that the current executives’ entitlement, if placed on notice, to 50% of the maximum amount of annual bonus “is a legacy issue contained within current contracts and will not be incorporated in service contracts for new appointments”. The results of TUI’s AGM (held on 6 February) saw 99.4% vote for the implementation report, with 97.6% of shareholders approving the remuneration policy.
• Compass Group’s release last month also looked to clarify information contained in the DRR, by stating that “any arrangement established specifically to facilitate recruitment of a particular individual would take the form of performance related variable remuneration”. The value of any such award would be limited to the value of awards that the individual had to surrender in order to be recruited, with the remuneration policy applicable to the existing executive directors applying to the balance of the new hire’s remuneration package. Again, the Remuneration Committee expressly stated that it “does not envisage that a ‘golden hello’ type cash payment would be offered to such individual”. Compass Group’s two parts of the DRR also received shareholder backing on 6 February, with 99.1% voting in favour of the implementation report, and 97.8% backing the remuneration policy.