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No sign yet of tide of shareholder discontent abating

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No sign yet of tide of shareholder discontent abating

By Kate Burgess and Elizabeth Rigby

Published: May 31 2008 03:00 | Last updated: May 31 2008 03:00

HSBC’s stormy annual meeting is the latest high water mark in the tide of shareholder discontent. Add it to the experiences of Royal Dutch Shell, BP and GlaxoSmithKline over recent weeks and the message is clear: investors are fed up with being seen as weak.

British companies feeling bruised by these attacks should look to the continent where political rhetoric is really building. The French government is threatening to curb “perfectly scandalous” pay packets for executives in underperforming companies, while the Dutch want to tax executive bonuses and severance packages.

It is inevitable that pay should become the battleground in these markets. Boards want to hold on to talent while executives want pay-back for the effort it takes to lead a business through troubled times.

And there is the rub: executives may feel they are working harder than ever to stand still, but their shareholders are watching their returns tick down. They are not prepared to wave through pay rises on the back of deteriorating investment portfolios.

But there is a second strand to this: shareholders are also worried that the delicate balance that non-executives need to strike between executives and the company’s owners is tipping towards managers.

If non-executives will not fulfil the role of keeping their executives in check, investors will take a more hardline approach. The bitter row between Marks and Spencer and some of its investors over its unilateral decision to promote Sir Stuart Rose to executive chairman was the first public glimpse of these tensions.

Directors trying to push through controversial proposals at annual meetings over the next few months should expect the water levels to continue to rise.

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