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BUSINESS WITH PERSONALITY See LONDON ON A KNIFE EDGE Page 3 ISSUEREVOLUTION 1,626 FRIDAY 4 MAY 2012 www.cityam.com FREE IN THE CITY BY JAMES WATERSON pledge that in future the board will listen SLY BAILEY ANDREW MOSS AXEL WEBER ANDREW SUKAWATY more closely to shareholder concerns. SHAREHOLDERS yesterday unleashed their It was only the fourth time that a FTSE 100 Trinity Mirror, CEO Aviva, CEO UBS, incoming chairman Inmarsat, chairman wrath on leading blue chip businesses with an firm has seen investors reject a remuneration unprecedented wave of rebellion against exec- report since advisory votes began in 2003. utive pay deals. “Shareholders are registering their displeas- Businesses including Aviva, UBS and ure with companies that have raised levels of Inmarsat suffered substantial rebellions compensation dramatically during the good against remuneration packages at AGMs held years and failed to reduce them following the yesterday. And last night Trinity Mirror boss Sly downturn,” said Adrian Hoggarth of law firm Bailey unexpectedly handed in her notice as Prolegal. leading shareholders prepared to mount a Swiss bank UBS was also embarrassed when campaign against her £1.7m pay package. more than one third of its shareholders reject- The largest revolt was at insurance giant ed its remuneration plans, including those for Aviva, where 59 per cent of shareholders failed incoming chairman Axel Weber and invest- to back proposed remuneration levels, protest- ment bank co-head Andrea Orcel. Rebellions by ing that executive pay at the insurer has con- large shareholder groups are a rarity in tinued to climb despite a persistently weak Switzerland but sub-par profits and a $2bn share price. Some called for directors – includ- rogue trading scandal energised a usually ing chief executive Andrew Moss – to quit. docile investor base. “The figures are evidence enough to con- British satellite company Inmarsat also saw demn your abject performance without reser- 37 per cent of shareholders reject a pay deal for vation,” said private investor Philip chairman Andrew Sukawaty who remains on Meadowcroft, who estimated Aviva’s total £614,000 despite handing over the chief execu- boardroom pay has risen 90 per cent in the last tive role to Rupert Pearce. A spokesman said four years as its shares fell 62 per cent. last night that this was a “transition phase” * The vote is advisory only and cannot block and that “the shareholders who voted against the insurer’s pay plans but it was enough to it are US proxy managers” who do not under- QUIT 59% 40% 40% force Aviva’s outgoing chairman, Colin stand the “unique” situation. ▲ Sharman, to issue an apology to investors and ▲ MORE: Page 2, Page 6, Page 12 * percentage of investors that did not vote in favour of pay plans ▲ ▼ ▼ Certified Distribution FTSE 100 5,766.55 +8.44 DOW 13,206.59 -61.98 NASDAQ 3,024.30 -35.55 £/$ 1.62 unc £/€ 1.23 unc €/$ 1.32 unc 27.02.2012 till 01.04.2012 is 99,462 FRIDAY 4 MAY 2012 2 NEWS To contact the newsdesk email [email protected] City pay revolt: Long live this most capitalist of revolutions FF with their heads: the and hedgie firm Man Group a few It is vital to understand what the hikes while share prices plummet message from shareholders is days ago – are themselves large insti- growing revolt against inappropriate and returns on capital wither are Obecoming louder and angrier EDITOR’S tutional investors. But corporate capi- boardroom pay deals is about – and rightly no longer being tolerated. by the day. “Listen to us”, they talism has an astonishing ability to what it isn’t. This is not a socialist The City is also finally cracking are rightly telling company boards, LETTER reinvent itself. The fact that it’s all revolt against inequality. It is a capi- down on rewards for failure, long a “you work for us. We pay you. Stop kicking off in the City is a great sign talist revolt to boost returns to capital blight on the financial landscape. Sly behaving as if you own the place.” that the system is beginning to work and prevent boards from diverting Bailey, who yesterday quit as boss of And that’s exactly the point: CEOs are ALLISTER HEATH sensibly again. resources to themselves. This is not Trinity Mirror, the newspaper group, merely shareholders’ paid hands. The Checks and balances are built into a about the public defeating the City – presided over years of decline. The real capitalists are the buy-side properly functioning market econo- it is about one part of the City hold- mood has also turned against bosses financial institutions – long only failing to act as proper stewards of my: if institutional shareholders ing another part to account. The rows who demand special dispensation funds, hedge funds, pension funds, individuals’ savings and pocketing accept poor returns, their own are not even really a protest against because their firms’ share price has insurance companies and other too many fees for insufficient returns. investors moan and threaten to with- high pay in general: remember, fund been hit by circumstances beyond pooled investment vehicles. They are Absentee landlords are never a good draw their funds. When the equity managers are not exactly badly paid their control, such as the Eurozone the shareholders – and therefore the thing. Capitalism requires engaged markets are weak, as they are at the themselves. They are merely opposed crisis or new regulations forcing owners of corporate Britain. The fact proprietors and custodians who mon- moment, the pressure eventually to the wrong sort of high pay, the banks and insurance companies to that they have belatedly remembered itor and assess the performance and reaches breaking point. That is where kind which isn’t related to perform- hold more capital. The message from their responsibilities is the best news behaviour of their executives to we are at today, and it helps to explain ance and which implies a dangerous shareholders is loud and clear: “if we in the City for ages. ensure that capital is allocated to its the mounting anger. Booming mar- looseness with other people’s money. suffer, or if we gain, then so should In recent days, institutional most productive use. Paradoxically, kets are bad for corporate governance: Golden hellos to compensate execs for our CEOs.” Long live the revolution. investors have begun reasserting two of the major firms to have suc- only the worst excesses get stopped leaving their previous job now clearly themselves – they too had come cumbed to a shareholder rebellion on and everybody turns a blind eye to fall into that category. High pay for [email protected] under fire, rightly in some cases, for pay – insurance giant Aviva yesterday rent-seeking and bad behaviour. great results remains fine; but pay Follow me on Twitter: @allisterheath RBS to repay IN BRIEF US jobless numbers fall sharply Britain on course to lose n The number of Americans filing new £163bn of loans claims for jobless aid dropped by the most in a year last week, easing fears the labour market recovery was to government stalling, official data showed yesterday. But separate figures on the BY JAMES WATERSON vote on EU banking rules vast US services sector was less upbeat, with the rate of growth ROYAL Bank of Scotland (RBS) is BY JULIET SAMUEL slowing more than expected and a set to announce today that it will gauge of employment falling to its finish repaying £163bn in BRITAIN is on course to be outvot- lowest level in four months. Initial emergency loans it owes to the UK ed for the first time ever on a claims dropped 27,000 to a seasonally and US governments. major piece of EU financial regula- adjusted 365,000, the Labor RBS, which is 82 per cent owned tion, after EU officials said they Department said yesterday – the by the British government, will had a majority in favour of propos- largest fall since May last year. unveil the plan when it publishes als that Osborne said would make However, the Institute for Supply its first quarter results today – him look “like an idiot”. Management said its services index which are expected to show a Following 16 hours of negotia- fell to 53.5 last month from 56 in slight decline in retail profits for tions on a set of new EU banking March, missing economists' forecasts the first quarter but a smaller loss rules that broke up at 2am on for a modest decline to 55.5, but still across the whole group. Thursday, Britain was still far from above the 50 “no change” mark. The repayments cover £75bn securing the concessions it wants. that RBS received from the credit If it cannot get enough support guarantee programme, which was between now and the next meet- Spain’s borrowing costs up again a key plank of the government’s ing of EU finance ministers in two n Spain saw yields jump at a bond bailout of banks in October 2008 weeks, the UK faces the prospect of auction yesterday, the first after its at the height of the financial losing control over its bank regula- recent downgrade to triple-B by credit crisis. tions despite being home to GETTY ratings agency Standard and Poor’s. It also includes repayment of Europe’s biggest financial centre. Chancellor George Osborne had testy exchanges with EU commissioner Michel Barnier However, demand remained solid, the £36.6bn it received through Denmark, which holds the EU’s largely from domestic banks. The emergency liquidity assistance rotating presidency, said: “There is lenders safer. London to tack on an additional government raised €2.5bn (£2.03bn) from the Bank of England and a supporting qualified majority The key issues at stake are Britain’s three per cent in capital require- as planned, paying 4.96 per cent on $84.5bn (£52bn) loaned by the US but we would like to widen this ability to implement its new macro- ments to the EU minimum and use five-year debt, compared with 3.696 Federal Reserve.