FTSE 100 firms are braced for a bruising few weeks as the battle with proxy advisers over executive pay in the City heats up.
The London Stock Exchange Group is planning to nearly double chief executive David Schwimmer’s pay to £13.2m from £6.3m but is facing resistance from proxy adviser Glass Lewis, which has urged shareholders to vote against the move at its upcoming annual general meeting on 25 April.
Medical manufacturer Smith & Nephew is facing a similar showdown with influential advisory group Institutional Shareholder Services (ISS), which told shareholders last week to reject a pay packet for Texas-based chief Deepak Nath at its annual general meeting on 1 May.
Under the plans, Nath’s total pay would rise by some 30 per cent to a maximum of $11.79m next year, if all of his targets are met. However, ISS said the increase was “excessive”.
The resistance will feed into the tug-of-war on pay this year in London as City figures call for higher pay packets in order to tempt in the best talent.
Capital markets guru and Latham & Watkins lawyer Mark Austin told City A.M. London needed to level the playing field with the US to stay competitive.
“If large international London-listed companies want to compete for talent globally they need to be able to offer competitive compensation,” he added. “The recommendations from some of the proxy agencies are hurting those efforts.”
The looming showdown with proxies comes after major shareholder votes on top-level pay took place last week at both Abrdn and Astrazeneca.
Astrazeneca suffered a minor rebellion from investors when around 35pc of its shareholders voted to reject a payout for chief executive chief Pascal Soriot, which will lift his maximum pay to £18.7m.
The revolt on pay by Astrazeneca shareholders triggered a furious response from the firm’s chair, who accused proxy advisers of “double standards” that “cannot easily be justified” in an article for the Financial Times.
The debate over remuneration in the City was fuelled by London Stock Exchange chief Julia Hoggett last year as she warned London was losing ground on the US.
In a blog in May, Hoggett wrote that efforts to hire the best talent were being “hampered by the advice and analysis of the proxy agencies and some asset managers voting against executive pay policies even when those pay levels are significantly below global benchmarks.”
An ISS spokesperson told City A.M. that it recommended against roughly 8.2 per cent of pay-related proposals at FTSE 350 firms last year, but less than one per cent failed to receive majority support.
“Clearly, investors decide themselves how to vote,” they said.