Getting Ready for the Next Proxy Season - Diligent Corporation · 2020-04-13 · FTSE 100 proxy review, providing boards with key takeaways and drawing from the 2018 season to ensure

Getting Ready for the Next Proxy Season2018 FTSE 100 Proxy Review

The 2018 proxy season saw an increasing focus

from investors on key governance matters such as

disclosure quality, director election, board

effectiveness, CEO pay and Environmental Social

Governance (ESG) practices. Although companies

have been improving their disclosure, the need for

transparency continued to be an important theme.

The season also saw a higher dissent from

shareholders on director re-elections than previous

years. Shareholders were sending a strong

message to directors that they will be held directly

accountable for their individual actions. The public

register, which is compiled by the Investment

Association in light of growing revolt in corporate

governance and general culture, showed that the

number of resolutions opposing individual director

re-elections increased from 38 in 2017 to 80 in 2018

in the United Kingdom. The FTSE 100, however,

showed a growth of 20% relative to the number of

resolutions in 2017. Specifically, in the FTSE 100, 6

companies in the index recorded more than 20% in

dissenting votes to re-elect their director(s) to the

board compared to 5 in 2017. These companies

are The Berkeley Group Holdings plc, AstraZeneca

plc, Barratt Developments plc, Sky plc, Royal Mail

plc, and British American Tobacco plc. The main

reason for the shareholder revolts is the number

of directorships held by individual members of the

board. Shareholders questioned whether a director

with several board appointments can really fulfil his

or her duties.

2017

382018

80

In preparation for the forthcoming 2019 proxy season, CGLytics is releasing its third consecutive annual FTSE 100 proxy review, providing boards with key takeaways and drawing from the 2018 season to ensure companies are adequately prepared to engage.

Total Number of Resolutions Opposing Director Re-election (all UK companies):

Getting Ready for the Next Proxy Season

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Overboarding and having the right board

composition, which includes diversity, continued to

hold shareholders’ interest. Investors were looking

closely at the number of appointments held by

directors, in addition to the mix of skill sets, tenure

and gender diversity at the board level.

Insight:

Shareholders are looking closely at the number of appointments held by directors and whether directors could be “overboarded”.

Source: Investment Association Public Register

Last season brought some interesting highlights as

the executive remuneration policies were due for

renewal and up for voting. CEO pay continued to be

an area of concern for shareholders as pay equity,

transparency, executive pay levels, and pay for

performance continued to ratchet higher.

• The average votes in favour of the

remuneration report fell slightly lower than the

previous year with corporations experiencing

significant push back on remuneration policies

that investors felt lacked clarity and enough

disclosures.

• Investors paid more attention in setting a

ceiling for total realised pay that directors could

earn and engaged actively on the performance

metrics of company remuneration plans.

• A study performed by CGLytics showed that almost

a third of the FTSE 100 companies have significant

misalignment between pay and performance

on a one and three year basis. Please refer to

the Appendix for CGLytics’ annual FTSE 100 Pay

for Performance Overview. It outlines the total

CEO realised compensation and company Total

Shareholder Return (TSR) performance for all FTSE

100 constituents against their peers in the index.

The Say on Pay LandscapeThe United Kingdom has been at the forefront

of shareholders’ concern over excessive pay

as investors over the years have voted against

issuers’ advisory remuneration reports. To

address these concerns, the Financial Reporting

Council (FRC) earlier in July 2018 issued a revised

Corporate Governance Code, which stressed

that remuneration committees should consider

workforce remuneration and related policies when

designing director remuneration. The revised

2018 Proxy Season HighlightsCompanies with Greatest Misalignment in 2017:

1. WPP plc

2. CRH plc

3. Sky plc

Companies with Greatest Misalignment on a Three-Year Basis (2015-2017):

1. Shire plc

2. Lloyds Banking Group plc

3. WPP plc

code also added that, as a measure, formulaic

calculations of performance-related pay should

be rejected. To reinforce the role of directors in

protecting shareholder interests, directors were also

encouraged to exercise independent judgement

and discretion when authorising remuneration

outcomes, taking account of company and individual

performance, along with wider circumstances.

Thirty-three companies of the FTSE 100

index sought a binding shareholder approval for

their remuneration policies, valid for at most three

years. Investors generally questioned the earning

potentials in short-term incentive plans presented

in some of the remuneration policies for

approvals. For example, at Rentokil Initial plc,

the board’s decision to increase the annual

bonus stretch or maximum from 100% to 150%

cost the board a dissent of around 25% on their

remuneration policy. Other companies that faced

more than a 20% vote against their remuneration

policy were Informa plc and Unilever plc.

Royal Mail plc received the highest shareholder

Getting Read for the next Proxy Season

2


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revolt on their remuneration report for the 2017

performance year compared to other FTSE 100

companies. With over 70% of the votes against the

advisory resolution for the Directors’ Remuneration

Report, the shareholders voiced their concern

saying the company has not been clear enough

about contractual entitlements of Moya Greene,

the retiring CEO, and the remuneration of Rico

Back, the new Group CEO.

Persimmon plc is the company that received the

second highest shareholder revolt with almost 49%

of votes against the Directors’ Remuneration Report.

The shareholders were concerned about the level of

remuneration that resulted from the vesting of 2012

awards, saying that there was no cap.

The other companies which received shareholder revolts

of more than 30% on their remuneration reports were

Astra Zeneca plc, BT Group plc, Unilever plc and CRH plc.

Shareholders of CRH plc communicated their concerns

regarding the directors’ remuneration and advocated for:

lower increase for directors’ remuneration, preference for

part of the increase to be delivered through long-term pay

and tougher executive shareholding guidelines. Several

shareholders asked about the mix of performance metrics

for the Performance Share Plan, as CRH uses KPIs other

than TSR. The company argued that they always strive

to balance the external shareholder metric (TSR) and an

internal metric that is more within management’s control.

Support Level: Advisory Votes for Remuneration Report

0

10

20

30

40

Support Level > 90%

50

60

70

80

90

100

Support Level > 89 - 70%

Support Level > 69 - 60%

Support Level < 60%

7975

16 20

2 3 3 2

2016 2017Performance Year:

3

Insight:

Shareholders cited alignment between compensation and performance as their main concern for voting against remuneration related resolutions.


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Overview of Pay vs. Total

Shareholder ReturnThe graphs below illustrate the alignment between

the average realised pay and TSR of the FTSE 100

companies from 2009 until 2017. The absolute value

graph shows the average value of realised pay and

TSR each year, while the relative growth graph

illustrates the year over year change. The average

TSR demonstrates a high volatility and a decrease

while the average realised pay fluctuates along the

years but with less volatility and an increase from

2009 to 2017. The average TSR for the FTSE 100

decreased to 8% in 2017 while the average total

realised pay increased by 5.5% to GBP 4.9 million.

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Getting Read for the next Proxy SeasonGetting Ready for the Next Proxy Season

Pay vs. TSR: Absolute Growth

-10

-5

0

5

10

15

20

25

2010 2011 2012 2013 2014 2015 2016 201720090

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

% GBP

TSR000Pay

Pay vs. TSR: Relative Growth

-20

-15

-10

-5

0

5

10

15

2010 /2011

2011 /2012

2012 /2013

2013 /2014

2014 /2015

2015 /2016

2016 /2017

2009 /2010

%

20

25

TRC Growth

TSR Delta

5

Compensation Mix Design:

Fixed vs. VariableThe FTSE 100 CEO compensation structure

continues to evolve. We saw a strong emphasis on

rebalancing CEO pay structure to be more long-

term oriented in the 2017 performance year. Base

salary fell from 20.1% in 2016 to 18.6% in 2017,

and short-term incentives fell from 23% to 22.9%

against the previous year. However, there is still

further work to be done. The charts below show

that when reviewing changes in compensation

structure over a longer period (from 2009 to 2017),

there actually has been a shift from long-term

incentives to fixed and short-term incentives.

0

20%

40%

60%

80%

Average CEO Realised Pay Breakdown100%

2010 2011 2012 2013 2014 2015 2016 20172009

Base Salary Realised STI Realised LTI

18%

21%61%

Salary Realised STI Realised LTI Salary Realised STI Realised LTI

19%

23%58%

2009 2017


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46

%

%

Compensation Mix Design:

Fixed vs. VariableThe annual pay for performance study performed by

CGLytics demonstrates that there is still a material

misalignment between pay and performance in the

FTSE 100 companies.

Pay for Performance Review: 2017

• 33% of the companies still display a pay for

performance misalignment.

• 34% of the companies display a good alignment.

• 32% of the companies show a conservative pay

level for the performance generated when

compared to the other FTSE 100 companies.

Pay for Performance Review: Three-Year Basis

• On a three-year basis, 29% of the companies

display misalignment.

• 42% of the companies display a good alignment.

• 28% of the companies show a conservative pay

level for the performance generated relative to

FTSE 100 companies.

British banks including HSBC and Lloyds show pay

for performance misalignment when measured over

a one-year period and continue to be misaligned

over a three-year period.

British American Tobacco, Randgold and Experian

plc were companies displaying misalignment

measured over a one-year period, though they

demonstrate good alignment on a three-year basis.

Companies like Melrose, Carnival, RSA Insurance

and WM Morrison are displaying a misalignment

when measured over a one-year period. However,

over a period of three years, their CEO pay falls into

the lower quartile despite strong TSR performance

when bench-marked against other FTSE 100 companies.

CGlytics‘ pay for performance study finds 29% of the

companies still show a misalignment over a three-year

period.

The charts on the next page display CGLytics’ pay for

performance analysis for the FTSE 100 CEO pay and

TSR performance over a one- and three-year period.

The companies that are situated within the grey

area are considered companies that have a strong

alignment between pay and performance. The

companies above and below the grey area show a

pay for performance misalignment. The entire index

constituents were used for this analysis.

33% 34%

32%

29%

42%

28%

Pay for Performance

HSBC Lloyds British Imperial Tobacco

Randgold Experian

Three

Year Basis (2015 - 2017)

2017

Realised LTI

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Conservative Aligned Misaligned


7

2017 Pay for Performance Alignment CEO Total Realised Compensation vs Total Shareholder Return

x

Tota

l Rea

lised

Com

pens

atio

n - P

erce

ntile

Ran

k

0th

50th

10

0th

Below Median TSR Below Median Compensation

Above Median TSR Below Median Compensation

WPP

SKY

CRHVodafone

AstraZenecaPrudential

RELXCarnival plc

ShellHSBC

Schroders

Randgold

ShireImperial

RSA

Lloyds BankAviva

ABF

Wm MorrisonGlaxoSmithKline

CompassDirect

Experian

Reckitt BenckiserBP

BAT

Melrose

Matthey

Bunzl

J Sainsbury

SSE

Grid

BT

ITV

BarclaysSEGRO

DiagioEAT

NMC

EVRAZ

Consolidated

Taylor

Rentokill

TUI

DCC

DS Smith

BarrattLSE

Ashtead

Smith & Nephew

Tesco plc

Berkeley

Intertek

Coca Cola HBC

Anglo3i

Unilever

Centrica

Severn TrentUnited Utilities

BAE

PersimmonSmurfit

Hotels

HalmaCroda

MondalMicro Focus

St James’

BHPBurberry

Rio Tinto plc

Sage

G4S

British Land

LegalOld Mutual

Pearson

GlencoreAntofagasta

RBS

Rolls Royce

Standard Life AberdeenChartered

Admiral Fresnillo

FergusonMail

SmithsWhitbread

Paddy

Mediclinic

NextMarks & Spencer

KingfisherLandsec

Informa

HarreaveseasyJet

SmithsFerguson

RioTintoDiagio

ExperianConsolidatedSmurfit

Direct

Schroders

Legal

AngloImperialSmith & Nephew

Bunzl

BT

VodafoneBritish Land

ITV

ABFBarclays

Taylor

3i

Berkeley

CompassTUI

BATRandgold

Barratt

DS SmithLSE

Unile-

RELX

Shell

HSBC

BPPrudential

GlaxoSmithKline

AstraZeneca

Reckitt Benckiser

Burberry

Sky

easyJet

Shire

WPP

Lloyds Banking

BAEOld Mutual

Tesco plc

Aviva

Grid

G4S

United UtilitiesChartered

Marks & SpencerCRHRBS

WhitbreadCentrica

Next

CRH

Carnival plcHotels

EAT

Mondi

Ashtead

Paddy

NMC

Coca Cola HBCPersimmon

Sage

HalmaInforma

CrodaSt James’s

AntofagastaGlencore

Wm MorrisonMail

Severn TrentKingfisher

J Sainsbury

Mediclinic

Matthey

Rolls Royce

Pearson

SSE

SEGRO

DCC RentokillIntertek

EVRAZ

Hargreaves

RSA

Standard Life Aberdeen

BHP

AdmiralFresno

MelroseMicro Focus

2017 3 Year Pay for Performance Alignment CEO Total Realised Compensation vs Total Shareholder Return

Tota

l Rea

lised

Com

pens

atio

n - P

erce

ntile

Ran

k

0th

50th

10

0th

0th 50th 100thBelow Median TSR Below Median Compensation

Above Median TSR Below Median Compensation


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0th 100th 50th

Below Median TSR Above Median Compensation

Above Median TSR Above Median Compensation

Below Median TSR Above Median Compensation

Above Median TSR Above Median Compensation

Percentile Rank

Percentile Rank

48

%

%

The company with the highest CEO compensation

is Melrose Industries plc. The CEO Simon Peckham’s

total realised compensation was GBP 42.8

million with Melrose’s TSR being 9%, earning the

company a performance percentile rank of 37 in the index

for the financial year under consideration. Over a three-

year period, the CEO’s total realised compensation grew

by more than 45 times, putting the company at the 100th

percentile despite the fact that TSR ranked at the 33rd

percentile with a negative change of 3%. Though when

looking at the cumulative value of the TSR, it grew with

344% over a three-year period, meaning an investment

made in the company at GBP 100 in 2015 would be worth

GBP 444 in 2017. This is the second highest investment

return in the index; yet, almost 23% of shareholders still

voted against the company’s remuneration during the

2018 proxy season.

NMC Health plc, a healthcare chain based in

the United Arab Emirates, had a percentile

ranking of 57 in the FTSE 100 index for its CEO

compensation. In 2017, the Chief Executive’s total

realised compensation was GBP 3.9 million with

Total Shareholder Return at 88%, which placed the

healthcare company at the forefront of the index

rankings. Total realised compensation grew by

493% from 2015 till end of 2017, whiles TSR

increased by 4%. The cumulative TSR from 2015 to

2017 is 538%, which means that GBP 100

invested in NMC in 2015 would be worth GBP 638

in 2017. This is the highest investment return in

the index. For their 2017 remuneration report,

shareholders voted in favour by 93%.

Centrica plc emerged as the company with the

lowest investment return in the index. The

Centrica CEO’s total realised compensation was GBP 1.7

million, which places the company in the 15th percentile

of the index. TSR for the 2017 financial year was -38%,

which ranked the lowest in the index. According to

our analysis, an investment worth GBP 100 in 2015

would be worth GBP 58.23 in 2017. This means that the

investment has been depleted by 42%. Yet, for their 2017

remuneration report, shareholder votes in favour were

95%.

Housebuilder Persimmon was heavily and negatively

featured in the news during the proxy season for a large

payout that became available to its CEO, demonstrating

the risks of pay for performance misalignment. Following

public and political backlash, Persimmon announced

that “by mutual agreement and at the request of the

Company, Jeff Fairburn, Group Chief Executive, is to

step down.” In 2012, shareholders approved a long-

term incentive plan, which did not have a cap, leading

to potential earnings of over GBP 100 million ofto the

CEO. There was unrest between the board and investors,

leading to the resignation of the Chairman of the Board,

Nicholas Wrigley, and Senior Independent Director,

Jonathan Davie, who was also the Remuneration

Committee Chair. A significant component of the GBP

100-million package was options, which were vested but

not exercised by the CEO during the financial year. This

led to a total realised pay for the CEO of approximately

GBP 2.2 million, which ranked at the 30th percentile for

the index. TSR was 63%, which was also ranked 98th in

the index. From 2015 to 2017, total realised compensation

grew by 16% and TSR by 28%. Three-year TSR for the

company is 105%, which means a GBP 100 investment in

the company in 2015 to be worth GBP 205 in 2017. The

company’s annual report on remuneration for 2017 was

narrowly passed by votes with around 52%. Another 31%

of shareholders abstained from voting on the resolution.

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9

2019 Proxy Season: Key Governance Themes for BoardsThe forthcoming season will continue to push

boards of companies to be well informed on their

governance practices. Boards should be ready to

engage early with their investors, who continue

to push companies to reform their practices and

mitigate exposure to governance risks.

Over the last few years, we have seen investors

expanding their Environmental, Social and

Governance (ESG) research capabilities to aid

their engagement and voting decisions. Boards of

companies can expect their investors to become

increasingly more sophisticated in assessing their

governance practices. A constructive dialogue

underpinned by powerful intelligence will support

boards in these engagements and in obtaining

shareholder buy-in during the early stages of the

proxy season.

What themes can boards expect in the 2019 season?

• Transparency. There continues to be a

push for transparency in engagement and

disclosures. Boards will need to be prepared

to better disclose and engage on their board

composition, say on pay proposals, and

governance decisions (particularly those related

to ESG).

• Board refreshment, gender diversity and board

composition. In the last proxy season, investors

actively engaged with boards on these key

governance matters. We expect this to continue in

the upcoming season as investors are looking to

further influence board strategy and composition for

their tie to company performance. Nomination and

Governance committees will need to demonstrate

that their directors have the right skills and that their

boards are diverse—also that there are no conflicts of

interest or overboarding exposure. These governance

matters will be closely monitored by investors

when companies are putting forward directors for

nomination and election.

• CEO succession and board evaluation. Chairs of

the Board and their Nomination and Governance

committees should be ready to provide a plan for

CEO succession to mitigate business continuity risk;

they must also demonstrate a robust process and

system for evaluating the performance of the board.

• CEO pay. CEO pay will continue to be

scrutinized. Compensation committees will

need to demonstrate a clear independence—

and will need to possess the right expertise

when engaging with their company

shareholders and other stakeholders.

Compensation policies and practices should

be designed to support strategy and promote

long-term sustainable success. It should be

aligned to company purpose and values and be

clearly linked to the successful delivery of the

company’s long-term strategy. Compensation

committees should be ready to engage with

their shareholders on the sustainability of their

company’s compensation practices (e.g., pay

equality and alignment between compensation

and performance).

• ESG. Investors will continue to evaluate companies’

progress on their environmental, social, and

governance (ESG) practices. Boards should be

prepared to disclose how ESG practices are

embedded in the company’s long-term plan for value

creation.

• Proactive shareholder engagement. The

importance of boards having a timely and open

dialogue with their shareholders will be critical.

Investors are looking for boards to engage

proactively, and not when a negative vote has


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%

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been issued or recommended.

With the governance landscape growing

increasingly complex, boards need to ensure they

have access to the same level of information as

their shareholders. Having the right data at your

fingertips has become key to making informed

decisions and conducting better engagements in

this active shareholder environment.


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FTSE 100

2017 Δ 2015-2017 2015-2017

Compensa-tion ReportAGM Vote Outcomes

Total Realised

Compen-sation

(million GBP)

2017 TSR

Com-pen-

sation Ranking

Perfor-mance

Ranking

Growth 2015-2017 TRC

Δ 2015-2017 TSR

Compen-sation

Ranking

Perfor-mance

Ranking

3YR Total Realised

Compen-sation

(million GBP)

3Y TSRCompen-

sation Ranking

Perfor-mance

Ranking

2017 year-end value

of 100 GBP investment

made January 1st, 2015

For%

1 (73) Old Mutual plc 3.4 16% 46 46 -13% 18% 37 65 9.6 37% 46 44 137 71.39

2 (46) Severn Trent plc 2.0 1% 23 23 -3% -12% 46 20 6.2 21% 15 33 121 99.34

3 (15) Pearson plc 1.5 -5% 12 11 -19% 0% 33 42 4.2 -27% 9 2 73 99.36

4 (91) Anglo American plc 6.1 37% 80 81 87% 111% 84 99 15.6 41% 71 48 141 90.35

5 (8) The Berkeley Group Holdings plc 27.5 56% 99 97 52% -1% 75 39 53.4 94% 99 86 194 83.91

6 (67) G4S plc 3.4 17% 48 50 38% 33% 70 88 9.0 7% 40 21 107 97.36

7 (85) Marks & Spencer Group plc 1.3 -5% 8 10 -71% -3% 3 35 7.2 -23% 22 4 77 98.70

8 (7) BAE Systems plc 2.1 0% 24 21 -35% -10% 24 24 8.6 37% 35 43 137 98.40

9 (54) Intertek Group plc 11.6 51% 95 92 500% 30% 98 85 18.4 134% 79 94 234 85.38

10 (26) 3i Group plc 6.8 34% 82 79 56% 22% 76 74 18.5 127% 80 93 227 94.29

11 (2) Legal & General Group plc 3.3 17% 45 48 -18% 4% 34 47 10.6 29% 52 39 129 98.17

12 (41) Land Securities Group plc 1.6 -2% 14 17 -43% -20% 12 14 5.9 -4% 14 12 96 98.14

13 (-) Mediclinic International plc 0.9 -15% 2 5 12% N/A 59 N/A 2.5 N/A 1 N/A N/A 93.54

14 (77) Ashtead Group plc 5.4 28% 74 70 28% 30% 66 84 12.9 82% 61 78 182 90.85

15 (43) Coca-Cola HBC AG 9.3 39% 90 85 276% 19% 96 68 13.7 109% 65 91 209 98.95

16 (18) Kingfisher plc 1.6 0% 13 19 0% 6% 48 31 5.3 8% 11 22 108 98.05

17 (16) Johnson Matthey plc 2.1 -1% 26 18 83% 20% 81 70 4.8 -2% 10 14 98 94.60

18 (9) United Utilities Group plc 2.0 -4% 22 13 -36% -10% 21 25 7.5 3% 24 19 103 99.00

19 (38) London Stock Exchange Group plc 4.7 32% 67 77 -42% 7% 16 48 18.8 77% 81 72 177 94.09

20 (39) DS Smith Plc 4.2 31% 64 73 -58% 4% 4 44 19.4 77% 83 71 177 96.79

21 (21) Next plc 1.2 -3% 6 15 -74% -15% 2 18 7.6 -22% 30 5 78 99.25

22 (66) Unilever plc 7.4 29% 83 72 -7% 15% 43 60 23.5 72% 88 69 172 97.19

23 (-) Paddy Power Betfair plc 1.8 3% 16 28 N/A -92% N/A 0 3.2 99% 3 87 199 80.40

24 (27) The British Land Company plc 2.3 15% 31 45 -29% 11% 30 54 7.3 1% 23 18 101 95.46

25 (74) Centrica plc 1.7 -38% 15 0 43% 31% 73 87 7.5 -42% 28 0 58 95.26

CGLytics - FTSE100 CEO P4P OVERVIEW (1 to 25)


Rank

ing

2017

(2

015)

11

Stro

ng A

lignm

ent

FTSE 100

2017 Δ 2015-2017 2015-2017


Total Realised

Compen-sation

(million GBP)

2017 TSR

Com-pen-

sation Ranking

Perfor-mance

Ranking


Δ 2015-2017 TSR

Compen-sation

Ranking

Perfor-mance

Ranking

3YR Total Realised

Compen-sation

(million GBP)

3Y TSRCompen-

sation Ranking

Perfor-mance

Ranking

2017 year-end value



For%

26 (72) Bunzl plc 2.7 0% 36 20 -51% -9% 9 28 10.7 24% 53 36 124 98.19

27 (10) Whitbread plc 1.9 9% 19 35 2% 15% 52 61 5.9 -11% 13 9 89 99.13

28 (80) Smiths Group plc 1.9 8% 18 34 -48% 19% 11 69 6.7 50% 17 54 150 98.14

29 (58) DCC plc 3.6 26% 52 69 61% -36% 77 6 10.6 120% 51 92 220 94.72

30 (35) J Sainsbury plc 3.1 1% 41 22 31% -9% 68 27 7.1 12% 21 27 112 95.31

31 (29) Schroders plc 5.4 21% 76 57 8% 7% 56 51 14.0 43% 66 51 143 95.83

32 (86) Smith & Nephew plc 3.6 7% 51 32 -37% 4% 20 46 12.2 15% 60 29 115 97.29

33 (48) TUI AG 4.2 38% 63 83 92% 23% 87 76 15.6 60% 70 62 160 92.01

34 (49) Royal Mail plc 1.4 3% 9 29 -7% -4% 44 32 4.4 22% 8 34 122 29.83

35 (94) Burberry Group plc 3.1 23% 40 61 -35% 48% 23 92 22.1 19% 87 30 119 89.24

36 (84) BHP Billiton plc 3.1 22% 39 60 1% 60% 51 94 8.8 35% 38 42 135 97.75

37 (4) Barratt Developments plc 4.9 49% 68 91 -49% 11% 10 53 17.6 63% 77 66 163 99.30

38 (61) Rentokil Initial plc 4.4 45% 66 90 164% 11% 92 55 11.6 175% 56 98 275 96.91

39 (56) The Sage Group plc 3.3 25% 44 67 72% -8% 80 29 6.9 84% 19 80 184 98.12

40 (6) Diageo plc 3.6 33% 53 78 63% 29% 78 82 9.9 61% 49 64 161 97.22

41 (51) JUST EAT plc 3.7 34% 54 80 -8% -26% 41 9 16.6 153% 76 96 253 98.34

42 (20) Mondi plc 2.1 19% 27 53 -57% -11% 5 21 12.1 99% 59 88 199 94.88

43 (92) Rio Tinto plc 3.4 31% 47 74 -14% 62% 35 96 9.3 54% 44 56 154 89.68

44 (59) Micro Focus International plc 2.2 20% 28 56 8% -32% 57 8 5.4 156% 12 97 256 93.13

45 (28) Taylor Wimpey plc 4.1 44% 59 89 -36% -11% 22 22 14.9 79% 69 74 179 98.20

46 (88) Standard Chartered plc 2.0 18% 21 51 -43% 53% 14 93 7.1 -11% 20 8 89 96.66

47 (11) Ferguson plc 1.5 10% 10 41 -29% 7% 29 49 9.2 55% 43 57 155 98.61

48 (19) International Consolidated Airlines Group, S.A. 4.1 52% 62 94 -9% 25% 39 78 11.6 45% 57 52 145 95.07

49 (53) SEGRO plc 3.6 39% 50 84 86% 19% 82 67 9.1 84% 42 81 184 97.42

50 (45) St. James's Place plc 2.6 25% 35 68 -14% -2% 36 36 8.2 65% 33 67 165 99.58

FTSE 100

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For%

1 (73) Old Mutual plc 3.4 16% 46 46 -13% 18% 37 65 9.6 37% 46 44 137 71.39

2 (46) Severn Trent plc 2.0 1% 23 23 -3% -12% 46 20 6.2 21% 15 33 121 99.34

3 (15) Pearson plc 1.5 -5% 12 11 -19% 0% 33 42 4.2 -27% 9 2 73 99.36

4 (91) Anglo American plc 6.1 37% 80 81 87% 111% 84 99 15.6 41% 71 48 141 90.35

5 (8) The Berkeley Group Holdings plc 27.5 56% 99 97 52% -1% 75 39 53.4 94% 99 86 194 83.91

6 (67) G4S plc 3.4 17% 48 50 38% 33% 70 88 9.0 7% 40 21 107 97.36

7 (85) Marks & Spencer Group plc 1.3 -5% 8 10 -71% -3% 3 35 7.2 -23% 22 4 77 98.70

8 (7) BAE Systems plc 2.1 0% 24 21 -35% -10% 24 24 8.6 37% 35 43 137 98.40

9 (54) Intertek Group plc 11.6 51% 95 92 500% 30% 98 85 18.4 134% 79 94 234 85.38

10 (26) 3i Group plc 6.8 34% 82 79 56% 22% 76 74 18.5 127% 80 93 227 94.29

11 (2) Legal & General Group plc 3.3 17% 45 48 -18% 4% 34 47 10.6 29% 52 39 129 98.17

12 (41) Land Securities Group plc 1.6 -2% 14 17 -43% -20% 12 14 5.9 -4% 14 12 96 98.14

13 (-) Mediclinic International plc 0.9 -15% 2 5 12% N/A 59 N/A 2.5 N/A 1 N/A N/A 93.54

14 (77) Ashtead Group plc 5.4 28% 74 70 28% 30% 66 84 12.9 82% 61 78 182 90.85

15 (43) Coca-Cola HBC AG 9.3 39% 90 85 276% 19% 96 68 13.7 109% 65 91 209 98.95

16 (18) Kingfisher plc 1.6 0% 13 19 0% 6% 48 31 5.3 8% 11 22 108 98.05

17 (16) Johnson Matthey plc 2.1 -1% 26 18 83% 20% 81 70 4.8 -2% 10 14 98 94.60

18 (9) United Utilities Group plc 2.0 -4% 22 13 -36% -10% 21 25 7.5 3% 24 19 103 99.00

19 (38) London Stock Exchange Group plc 4.7 32% 67 77 -42% 7% 16 48 18.8 77% 81 72 177 94.09

20 (39) DS Smith Plc 4.2 31% 64 73 -58% 4% 4 44 19.4 77% 83 71 177 96.79

21 (21) Next plc 1.2 -3% 6 15 -74% -15% 2 18 7.6 -22% 30 5 78 99.25

22 (66) Unilever plc 7.4 29% 83 72 -7% 15% 43 60 23.5 72% 88 69 172 97.19

23 (-) Paddy Power Betfair plc 1.8 3% 16 28 N/A -92% N/A 0 3.2 99% 3 87 199 80.40

24 (27) The British Land Company plc 2.3 15% 31 45 -29% 11% 30 54 7.3 1% 23 18 101 95.46

25 (74) Centrica plc 1.7 -38% 15 0 43% 31% 73 87 7.5 -42% 28 0 58 95.26

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value of 100 GBP invest-ment made January 1st,

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For%

51 (70) EVRAZ plc 4.1 68% 60 99 89% 120% 85 100 9.9 141% 50 95 241 95.79

52 (65) NMC Health Plc 3.9 88% 57 100 493% 4% 97 45 8.4 538% 34 100 638 92.68

53 (44) Croda International plc 3.2 41% 43 86 33% 24% 69 77 7.7 78% 32 73 178 91.28

54 (32) Standard Life Aberdeen plc 1.9 24% 20 64 -39% 21% 19 72 7.6 28% 29 37 128 97.36

55 (5) Intercontinental Hotels Group plc 2.4 32% 32 76 -9% 27% 40 80 8.8 100% 37 89 200 82.33

56 (52) Halma plc 3.1 42% 42 87 39% 14% 71 59 7.6 91% 31 83 191 96.74

57 (64) Admiral Group plc 0.4 16% 0 47 -1% -18% 47 15 1.1 82% 0 77 182 90.36

58 (33) Fresnillo plc 0.8 19% 1 54 0% 26% 49 79 2.5 92% 2 84 192 99.79

59 (24) Smurfit Kappa Group plc 2.2 38% 29 82 -52% 9% 7 52 9.1 46% 41 53 146 88.20

60 (14) Rolls-Royce Holdings plc 1.9 29% 17 71 151% 61% 91 95 4.3 3% 7 20 103 98.87

61 (71) The Royal Bank of Scotland Group plc 1.5 24% 11 65 -41% 47% 18 90 7.5 -30% 27 1 70 99.18

62 (60) Persimmon plc 2.2 63% 30 98 16% 28% 60 81 6.3 105% 16 90 205 51.48

63 (13) Glencore plc 1.1 43% 5 88 9% 111% 58 98 3.4 41% 4 47 141 98.94

64 (12) Antofagasta plc 1.3 52% 7 95 17% 89% 61 97 3.6 39% 5 45 139 99.08

65 (63) Hargreaves Lansdown plc 1.0 52% 3 93 -24% -1% 32 37 4.3 92% 6 85 192 96.57

66 (40) easyJet plc 1.0 54% 4 96 -77% 47% 1 91 7.5 -1% 26 15 99 99.58

67 (96) HSBC Holdings plc 7.5 24% 84 63 -4% 30% 45 86 24.0 52% 90 55 152 97.00

68 (78) Vodafone Group plc 8.0 25% 87 66 63% 20% 79 71 18.9 24% 82 35 124 97.12

69 (57) Informa plc 4.1 9% 61 39 102% -25% 88 11 9.4 83% 45 79 183 93.21

70 (36) National Grid plc 3.1 -3% 38 14 41% -10% 72 23 9.0 10% 39 23 110 96.94

71 (34) SSE plc 2.5 -10% 33 7 50% -9% 74 26 6.8 -3% 18 13 97 97.85

72 (22) RSA Insurance Group plc 5.1 11% 71 42 106% 12% 89 57 11.2 55% 55 58 155 96.63

73 (95) Lloyds Banking Group plc 5.2 14% 73 44 -43% 16% 13 64 20.4 1% 86 17 101 79.22

74 (87) Tesco PLC 3.7 2% 55 24 -8% 23% 42 75 12.0 11% 58 26 111 96.64

75 (25) BT Group plc 2.5 -22% 34 2 -56% -43% 6 3 9.8 -24% 48 3 76 65.84

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FTSE 100

2017 Δ 2015-2017 2015-2017

Compen-sation Report

AGM Vote Outcomes

Total Realised

Compen-sation

(million GBP)

2017 TSR

Com-pen-

sation Ranking

Perfor-mance

Ranking


Δ 2015-2017 TSR

Compen-sation

Ranking

Perfor-mance

Ranking

3YR Total

Realised Compen-

sation (million

GBP)

3Y TSRCompen-

sation Ranking

Perfor-mance

Ranking

2017 year-end

value of 100 GBP invest-ment made January 1st,

2015

For%

51 (70) EVRAZ plc 4.1 68% 60 99 89% 120% 85 100 9.9 141% 50 95 241 95.79

52 (65) NMC Health Plc 3.9 88% 57 100 493% 4% 97 45 8.4 538% 34 100 638 92.68

53 (44) Croda International plc 3.2 41% 43 86 33% 24% 69 77 7.7 78% 32 73 178 91.28

54 (32) Standard Life Aberdeen plc 1.9 24% 20 64 -39% 21% 19 72 7.6 28% 29 37 128 97.36

55 (5) Intercontinental Hotels Group plc 2.4 32% 32 76 -9% 27% 40 80 8.8 100% 37 89 200 82.33

56 (52) Halma plc 3.1 42% 42 87 39% 14% 71 59 7.6 91% 31 83 191 96.74

57 (64) Admiral Group plc 0.4 16% 0 47 -1% -18% 47 15 1.1 82% 0 77 182 90.36

58 (33) Fresnillo plc 0.8 19% 1 54 0% 26% 49 79 2.5 92% 2 84 192 99.79

59 (24) Smurfit Kappa Group plc 2.2 38% 29 82 -52% 9% 7 52 9.1 46% 41 53 146 88.20

60 (14) Rolls-Royce Holdings plc 1.9 29% 17 71 151% 61% 91 95 4.3 3% 7 20 103 98.87

61 (71) The Royal Bank of Scotland Group plc 1.5 24% 11 65 -41% 47% 18 90 7.5 -30% 27 1 70 99.18

62 (60) Persimmon plc 2.2 63% 30 98 16% 28% 60 81 6.3 105% 16 90 205 51.48

63 (13) Glencore plc 1.1 43% 5 88 9% 111% 58 98 3.4 41% 4 47 141 98.94

64 (12) Antofagasta plc 1.3 52% 7 95 17% 89% 61 97 3.6 39% 5 45 139 99.08

65 (63) Hargreaves Lansdown plc 1.0 52% 3 93 -24% -1% 32 37 4.3 92% 6 85 192 96.57

66 (40) easyJet plc 1.0 54% 4 96 -77% 47% 1 91 7.5 -1% 26 15 99 99.58

67 (96) HSBC Holdings plc 7.5 24% 84 63 -4% 30% 45 86 24.0 52% 90 55 152 97.00

68 (78) Vodafone Group plc 8.0 25% 87 66 63% 20% 79 71 18.9 24% 82 35 124 97.12

69 (57) Informa plc 4.1 9% 61 39 102% -25% 88 11 9.4 83% 45 79 183 93.21

70 (36) National Grid plc 3.1 -3% 38 14 41% -10% 72 23 9.0 10% 39 23 110 96.94

71 (34) SSE plc 2.5 -10% 33 7 50% -9% 74 26 6.8 -3% 18 13 97 97.85

72 (22) RSA Insurance Group plc 5.1 11% 71 42 106% 12% 89 57 11.2 55% 55 58 155 96.63

73 (95) Lloyds Banking Group plc 5.2 14% 73 44 -43% 16% 13 64 20.4 1% 86 17 101 79.22

74 (87) Tesco PLC 3.7 2% 55 24 -8% 23% 42 75 12.0 11% 58 26 111 96.64

75 (25) BT Group plc 2.5 -22% 34 2 -56% -43% 6 3 9.8 -24% 48 3 76 65.84

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• Not listed in the table above is FTSE 100 company Scottish Investment Trust plc, which did not have a CEO in 2017• Paddy Power and Mediclinic did not have data for 2015 and were excluded from the ranking position of 2015 and are marked as (-)• Deviation numbers were rounded to the second decimal places

FTSE 100

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Total Realised

Compen-sation

(million GBP)

2017 TSR Com-pen-

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Perfor-mance

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Δ 2015-2017 TSR

Compen-sation

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Ranking

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3Y TSRCompen-

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2017 year-end value



For%

76 (93) Randgold Resources Limited 6.3 17% 81 49 2% 21% 53 73 20.4 74% 85 70 174 92.28

77 (42) ITV plc 2.9 -15% 37 4 -32% -49% 27 1 11.0 -8% 54 10 92 96.23

78 (83) AstraZeneca plc 9.4 21% 91 58 21% 15% 63 63 30.6 29% 93 38 129 65.06

79 (75) Royal Dutch Shell A plc 7.9 18% 86 52 193% 42% 95 89 13.4 42% 64 50 142 74.78

80 (81) RELX plc 11.8 23% 96 62 -25% 11% 31 56 40.2 70% 97 68 170 83.62

81 (23) Aviva plc 5.2 9% 72 38 21% -1% 65 38 13.2 19% 62 31 119 97.13

82 (79) Associated British Foods plc 4.2 4% 65 30 -34% -3% 25 34 13.2 -7% 63 11 93 98.35

83 (89) Prudential plc 9.7 20% 92 55 21% 15% 64 62 29.6 39% 92 46 139 94.91

84 (62) Carnival plc 22.4 22% 98 59 1426% -14% 99 19 29.3 81% 91 76 181 92.40

85 (3) Barclays plc 3.5 -8% 49 8 90% 0% 86 41 9.7 -11% 47 7 89 95.96

86 (68) Compass Group plc 5.6 9% 77 36 5% -1% 54 40 15.8 56% 72 60 156 96.58

87 (31) Direct Line Insurance Group plc 5.7 8% 78 33 5% -40% 55 5 16.0 58% 73 61 158 76.58

88 (17) Experian plc 5.9 5% 79 31 31% -8% 67 30 14.5 60% 67 63 160 81.37

89 (97) BP plc 8.8 10% 88 40 -33% 18% 26 66 31.4 56% 94 59 156 96.42

90 (47) Imperial Brands PLC 4.0 -6% 58 9 18% -40% 62 4 14.5 29% 68 40 129 98.48

91 (30) British American Tobacco plc 11.1 13% 94 43 134% 1% 90 43 23.9 62% 89 65 162 75.68

92 (1) Wm Morrison Supermarkets plc 5.0 -2% 69 16 191% 12% 94 58 8.6 33% 36 41 133 84.66

93 (90) Shire plc 3.8 -16% 56 3 -51% -20% 8 13 19.6 -13% 84 6 87 89.13

94 (69) Reckitt Benckiser Group plc 9.3 3% 89 27 -42% -20% 15 12 35.2 42% 96 49 142 89.03

95 (55) Melrose Industries plc 42.8 9% 100 37 4508% -3% 100 33 44.7 344% 98 99 444 77.13

96 (82) GlaxoSmithKline plc 5.0 -11% 70 6 -29% -16% 28 16 16.5 14% 74 28 114 90.41

97 (37) Sky plc 10.4 2% 93 26 -9% -25% 38 10 31.5 20% 95 32 120 70.99

98 (50) CRH plc 7.6 -4% 85 12 184% -35% 93 7 18.0 84% 78 82 184 60.31

99 (76) WPP plc 15.5 -23% 97 1 -78% -43% 0 2 132.1 10% 100 24 110 72.75

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AppendixOur methodology on Total Realised Compensation explainedThe realised compensation includes all realised components of compensation in the year of interest. It is defined as the sum of total indirect

compensation realised and total direct compensation realised for one year. It consists of base salary + benefits + other compensation + bonus +

deferred cash bonus + deferred share bonus + value of performance/restricted shares vested + value of performance/restricted options exercised.

Total realised pay is calculated based on performance indicators that have been met during the performance period. Most companies clearly disclose

the performance period and vesting period, and the percentage that will be paid in the next year. For example, for shares that will vest on March 31,

2016 but where the performance period ends at December 31, 2015, shares are included in realised compensation for the financial year 2015. When

the company doesn’t disclose the average share price over the last quarter, we use the company year-end share price to calculate the value of the

vested multiyear share packages. In line with UK practices, adjustments are usually made in the following year when the company disclose the exact

share price on which the shares vested. For options, we calculate realised pay when the options have actually been exercised. In the event there were

two CEOs in a year for a company, for example due to a change in CEO, we explored the companies on individual basis and annualized compensations

depending on the issue at hand to make the total realised compensation as realistic as possible.

Total Shareholder Return (TSR) Total shareholder return is defined as the total return of a stock to an investor. It combines annual changes in stock price and dividends paid, and is expressed

as an annualised percentage. This is calculated over one-year (1Y) and three-year (3Y) period. The growth in 3Y TSR is calculated by the percentage points of

difference between the latest year and 3 years prior. Please note that all figures have been rounded up in the table outlining the CEO pay for performance

analysis.

CGLytics - FTSE100 CEO P4P Overview explainedThe methodology was based on a degree of alignment between +20% or -20%. Companies that fell between this range are considered to be strongly

aligned and were ranked from lowest to the highest with reference to their degree of deviance from the regression line. The next companies in the

overview are those with their degree of deviation above 20%. These companies are considered to have a more conservative policy, with performance

ranking higher than compensation. At the bottom of the ranking are the companies whose degree of deviation falls below -20%. The companies that

fall in this category are considered to have an aggressive policy, with compensation ranking higher relative to performance (TSR). All companies were

ranked from lowest to highest level of deviation from the regression line with reference to 2017 compensation. The ranking also shows how the FTSE

100 index has changed relative to 2015 using the methodology explained above.

Investment return of GBP 100

This figure looks to calculate how much a GBP 100 company investment would be worth over a period of time by indexing the TSR over multiple years.

Pay for Performance analysisWe conducted a study on CEO realised compensation to determine degree of alignment relative to peers in the FTSE 100 on a 1 and 3 years basis. The

degree of alignment is determined by subtracting the compensation rank from the performance rank within a scope of +20% or -20%. Results obtained

on either side determine a more generous or a conservative remuneration policy. Therefore, for the three years’ study, the percentile rank is calculated

by the Total Realised Compensation over the period subtracted from the sum of the period TSR performance.

Definition of financial years FTSE 100 companies have different year end dates. The most common year end dates are displayed below; 31/12, 31/3, 31/7 and 30/9. The main rule

applied is that in a specific year, financial year end dates until 31/3 is reported as financial year of the previous year. All financial year end dates after

31/3 are reported as the year in which the financial year ends.


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About Us CGLytics provides powerful data analytics and actionable intelligence on the “G” of Environmental, Social & Governance (ESG). Our solutions are designed to help corporations, institutional investors, financial institutions and professional services firms to efficiently and effectively manage the increasing challenges they face in reviewing and addressing corporate governance risks and associated decision-making. CGLytics provides an integrated cloud-based, data technology solution, to independently analyze data on the value creation and governance practices of leading listed companies across the globe, in a single convenient solution. CGLytics is a signatory to the UNPRI.

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Getting Ready for the Next Proxy Season - Diligent Corporation · 2020-04-13 · FTSE 100 proxy review, providing boards with key takeaways and drawing from the 2018 season to ensure