Institutional Shareholder Services (ISS) recently released its first stand-alone UK and Ireland Proxy Voting Guidelines (previously, ISS and the NAPF issued guidelines through Research Recommendations and Electronic Voting, their joint venture which came to an end in June 2014).
The guidelines apply to shareholder meetings held on or after 1 February 2015. In the area of remuneration, these build on the NAPF Guidelines and are also influenced by the Investment Management Association Principles of Executive Remuneration (formerly the ABI guidelines) and the GC100 and Investor Group Directors’ Remuneration Reporting Guidance. Given that, it’s not surprising to find that they don’t contain anything ground-breaking.
However, interestingly the new ISS paper has a section specifically for smaller companies – generally speaking, guidance on remuneration only applies to fully-quoted companies. For both fledgling and AIM companies, “a negative vote recommendation would be considered” for:
- the absence of formal service contracts for directors or notice periods longer than 12 months;
- non-executives receiving performance-related pay;
- re-pricing of options;
- vesting of awards not being subject to performance conditions;
- re-testing of performance targets; or
- vesting periods of less than 3 years.
This is particularly relevant to AIM-listed Quindell, which is currently being slated in the press (see this example) for granting options to directors that are exercisable between 6 and 12 months from the date of grant, including some to its non-executive chairman. Not only that, one of the beneficiaries is Jim Sutcliffe, the chairman of the FRC’s Codes and Standards Committee, which oversees the UK Corporate Governance Code. Amongst other things, the code prohibits non-executive directors participating in a company’s share plans and in the event of non-compliance requires an explanation of how such a director remains independent. So come the AGM, can we anticipate that the company might have a spot of bother with the vote on its remuneration implementation report?