UK: Bellway shareholders reject remuneration report

Last Friday, at the Bellway plc annual general meeting, a majority of shareholders voted against the company's remuneration report (see pp. 34-41 of the company's annual report and accounts). It is highly unusual for a company to lose such a vote. The cause of the shareholders' concern was the company's lack of consultation regarding directors' bonuses and the vagueness over future policy. After the meeting, the board published this statement expressing contrition:

The Board has noted shareholders' views on the Report of the Board on Directors' Remuneration and believes it was wrong in not consulting with major shareholders earlier. It therefore proposes to review future policy on this matter, in consultation with them, in the coming months".

Notes:

[1] The UK's Combined Code on Corporate Governance stresses the importance of discussion with shareholders. Main Principle D1 provides:

There should be a dialogue with shareholders based on the mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place"

[2] Quoted companies are required to provide shareholders with the opportunity to vote on the contents of the remuneration report (see Section 439 of the Companies Act 2006). The vote is advisory and does not effect the validity of the company's remuneration arrangements. 

[3] The Association of British Insurer's Director of Investment Affairs, Peter Montagnon, provided the following comments in a statement issued after the AGM:

This is a very clear message that there must be a proper link between reward and performance, even in a sharp economic downturn. It is right that Bellway should consult with shareholders on its policy review. More broadly, shareholders expect all companies to be sensitive to the need for bonuses to be paid only if stretching targets are met. Remuneration consultants, who advise companies, should be particularly alert to the views of shareholders in this regard.”