The bosses of British public businesses will face intense pressure to invest their own money in the companies they run in 2020, as big investors increasingly demand chief executives have “skin in the game”.
Schroders, the UK’s largest listed investment company by market cap, Aviva Investors, the £380bn asset manager, and Allianz Global Investors, the €557bn fund house, are among the big shareholders demanding chief executives buy more shares in their companies.
The issue is set to be one of the themes dominating negotiations ahead of this year’s annual general meeting season.
The growing pressure from shareholders comes after a string of UK corporate scandals, including the collapse of Carillion, raising questions about whether more can be done to align the interests of shareholders and chief executives.
Mirza Baig, global head of governance at Aviva Investors, said he wanted chief executives to share risks with shareholders. “We want to see more co-investment,” he said.
Eugenia Unanyants-Jackson, head of environmental, social and governance investing at AllianzGI, said: “There is now more emphasis on having greater shareholding by the executives.”
According to research from S&P Global Market Intelligence in 2018, companies where chief executives have large stock option holdings have historically outperformed their index, in aggregate, over subsequent quarters.
Companies typically set out how many stocks an executive should hold and in what timeframe they have to build that pot. For example, a chief executive might be required to have shares equal to 200 per cent of salary, building the holding within five years.
But one big shareholder said: “We are seeing a lot of executives get to their shareholding requirements in time because of share awards as part of their remuneration, not by going into the market and buying shares.”
Ms Unanyants-Jackson added that it was not enough that chief executives built up a shareholding through their bonus and share awards, arguing that these were “free” stocks. Instead, she called on bosses to buy shares in the market from their own pockets. “You need to have skin in the game,” she added.
She said that AllianzGI wanted chief executives to hold a minimum of 200 per cent of their salary in shares. “If someone is earning £1m, we expect them to have several million [pounds worth of shares] within a few years.”
Guidance from the Investment Association, the trade body, said that executive directors and senior executives should build up significant holdings in their company’s shares. “Executives are encouraged to purchase company shares using their own resources in order to provide evidence of their alignment with shareholders,” the trade body said.
According to research from Deloitte, the median shareholding requirement for a FTSE 100 chief executive is 300 per cent of salary, although about half of chief executives hold shares worth more than 500 per cent of salary.
The IA wrote to the remuneration committee chairs of British businesses in November 2018 to update executives about which shares could count towards shareholding guidelines.
The trade body recently said that during the upcoming annual meeting season, shareholders will push for so-called post-employment shareholding requirements — which outline how long shares need to be held for after leaving a company — to be introduced for all new policy approvals.
"Skin" - Google News
January 04, 2020 at 06:00PM
https://ift.tt/37BIOYV
Shareholders demand British bosses increase ‘skin in the game’ - Financial Times
"Skin" - Google News
https://ift.tt/2Rv81zw
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
No comments:
Post a Comment