"Fat cats" face backlash over pay Shareholders and pensioners are flexing their muscles to curb executive excess, writes Jeff Salway SHAREHOLDERS and pension fund members are calling for a greater say in how their savings are invested after Aviva became the latest FTSE 100 company to feel a backlash over executive pay. The insurance giant last week lost a vote on pay that saw 54 per cent of shareholders oppose its remuneration report. It was only the fourth such defeat for a FTSE 100 firm and came even after chief executive Andrew Moss had rejected a pay rise. Board members were accused by one shareholder of being more concerned with pay than growing the business and told they had "overseen a year-by-year destruction in shareholder value." Last week Sly Bailey, chief executive of Daily Record and Sunday Mail publisher Trinity Mirror, announced she was stepping down amid growing anger over her £1.7 million salary package. The group was reported to be facing a shareholder rebellion over pay after the Association of British Insurers issued an "amber-top alert" over Trinity's new bonus plan, urging investors to think hard before waving it through. Trinity's share price has plunged 90 per cent in the ten years Bailey has been in charge. Barclays also hit the headlines recently when shareholders ran out of patience with the rewards enjoyed by its top executives. Almost a third refused at its AGM in late April to back its latest remuneration report amid anger at chief executive Bob Diamond's £17m pay package. The bank also came under fire for paying out more in staff bonuses last year - £2.1 billion - than in dividends to shareholders, which amounted to just £700m. The biggest shareholders in companies such as Barclays are institutional investors such as pension funds and life insurers. But they invest billions of pounds on behalf of millions of ordinary savers - a growing number of whom feel angered by the pay packets given to top executives. Then there are the millions of private investors with direct shareholdings who are becoming an increasingly vocal presence at AGMs. The power of the small stakeholders has not been harnessed - but that may be set to change. Scrutiny of the role played by the fund managers who invest on behalf of savers is sharpening, with campaigners and shareholder groups looking closely at how they vote on issues such as remuneration. And boardroom pay could yet be the catalyst for change as companies are held to account by shareholders. Incomes Data Services revealed in October that FTSE 100 directors had enjoyed a 49 per cent rise in pay packages to an average of £2,697,644 over the past year, with several chief executives collecting more than £10m. Yet while public opposition to excessive pay has snowballed in recent years, there have been few signs of those packages being reined in. But the Barclays backlash may reflect a broader shift in attitudes. A recent report by The Share Centre, "Accountability in Business," found that 95 per cent of institutional investors (typically pension funds) believe executive pay has become excessive. More than eight in ten would support bonus clawback arrangements and a fifth said they were increasingly likely to ask companies to justify salary rises that seem out of step with wider employee pay. All eyes are now on business secretary Vince Cable, who wants shareholders to be given a binding vote allowing them to block executive pay and veto so-called golden goodbye deals. He is also considering a rule change that would require companies to secure 75 per cent of share votes in approving remuneration reports. The consultation on the proposals closed last week. So what has this got to do with you? You may feel strongly about banker pay and bonuses, for example, but if you've got a pension or other investments you've probably got money in funds that automatically vote in support of company remuneration proposals. This week, FairPensions, a group that promotes responsible investment, launched a high pay campaign aimed at "taking action on spiralling bonuses." It wants the big pension funds to be held more accountable to those whose money they invest, making it easier for savers to understand and have a say in the decisions made by fund managers. Its new "your say on pay" email generator (www.fairpensions.org.uk/highpay) allows savers to tell their pension fund or individual savings account (Isa) provider if they want boards to be challenged on high pay. Investors and pension fund managers should be able to let fund managers know their feelings on issues such as executive pay, according to FairPensions, so that institutions are reflecting the views of the actual owners of UK plc. Catherine Howarth, chief executive FairPensions, said: "There is fierce public anger about excessive executive pay but, until now, there hasn't been anything people could usefully do about it. Our new action tool gives people a meaningful opportunity to make their views known where it counts, with the pension funds and Isa providers who cast votes on executive pay on our behalf. I strongly urge Scots to have their say on high pay and to do their bit to make an impact on the problem of spiralling bonuses. As it stands, it's currently difficult for investors to ensure their money is in the custody of fund managers who share their views on issues such as executive pay and other social responsibility and ethics factors. Finding out what a company in which you own shares is doing or how actively a fund manager in which you hold money is voting on pay rewards tends to take a fair bit of paperwork. That means anything from delving into annual reports and accounts and checking dividend payment records to looking at the voting records of the funds in which you have money. Individual investors can also seek to limit their fund choice to ethical and socially responsible investment (SRI) funds. However, there's now a big basket of such funds focusing on a wide range of issues, of which pay remains a very minor one. Few investment funds make a big deal of the way they vote on executive pay, for now at least. Julian Parrott, partner at Edinburgh IFA Ethical Futures, said: "We tend to a preference to fund managers that do publish voting records and have a policy of voting on all resolutions. I would like to see much stronger policy on pay - and it may well come but until then we just tend to prefer more active funds. However, investment managers are beginning to take a stronger line on excessive pay and are increasingly prepared to oppose company pay agreements. That is partly due to the post-banking crisis backlash over bonuses and the increasingly clear message that fund managers are hearing from individual investors - it's time they stood up to excessive pay. Aviva, Ecclesiastical and Henderson are among a growing number of investment managers that do - or have - provided details of their voting records. The Labour Party has proposed changes that would see fund managers forced to disclose how they vote on executive pay in the companies in which they have holdings. As it stands, just 15 per cent of managers reveal how they vote on executive pay and other matters, according to Pensions and Investment Research Consultants. Chuka Umunna, shadow business secretary, said in a statement: "Making fund managers disclose how they vote on issues will mean the pensioner or the ordinary investor will be in a better position to access information on how votes are cast in their name on matters such as executive pay."