The Church Investors Group has warned some of Britain’s biggest companies it intends to take a hard line over failings on executive pay, gender diversity and climate change in the forthcoming annual meeting season.
The group, which represents church organisations with combined investment assets of about £17bn, has told companies listed on the FTSE 350 index it will refuse to re-elect directors at firms failing to make sufficient progress in key areas.
“The best companies contribute to the common good through their products and services and the way they treat their employees,” said the Rev Canon Edward Carter, chair of the CIG.
“Their directors understand that if they are not doing something about fairness and about the risks facing us today, they are part of the problem and risk losing the confidence of the public and ultimately their licence to operate.”
The group’s members have invested in companies including Tesco, Royal Dutch Shell, AstraZenca and HSBC. It backs investment policies based on Christian ethical principles and represents institutional investors from mainstream Christian church denominations and charities, including the main investment bodies of the Church of England and the Methodist church.
Outlining its new voting policy, the CIG said its members would vote against executive pay packages where pay ratios are not disclosed, excessive pensions for chief executives or where financial services or pharmaceutical companies do not pay the living wage.
It will also scrutinise a company’s record on gender diversity, voting against the re-election of nomination committee chairs if women make up less than a third of the board. If the proportion of women drops below 25%, CIG members will vote against all directors on the committee.
According to the latest figures published by the government-backed Hampton-Alexander review – which aims to increase the number of women on FTSE boards – there were 301 firms in the FTSE 350 at the end of June 2017 where the proportion of women on the board was less than 33%.
A total of 170 firms would have failed the CIG’s test of having female board representation equivalent to less than 25%, including BP, Barclays, Prudential and Just Eat.
The proportion of women on boards falls to just 9% at the pub and restaurants group Mitchells & Butlers, and there are no women at all on the board of Sports Direct, the retailer founded and run by Mike Ashley.
Stefan Stern, director of the High Pay Centre, welcomed the new voting policy adopted by the CIG, and said the group was “putting some teeth into the issues, which is necessary”.
Climate change is the third key area for the CIG, which said its members would vote against the re-election of the chair if a company is making little progress on the transition to a low-carbon world.
“Church investors have long sought to address excessive executive pay and encourage the adoption of the living wage,” said Stephen Beer, chief investment officer of the central finance board of the Methodist church.
“Our new policy will enable us to send a clear signal to companies that we expect them to consider fairness when setting executive pay levels. We encourage the wider investment community to hold directors accountable and ensure more responsible stewardship on this critical subject.”
The 2018 annual meeting season gets into full swing in spring, and last year the CIG did not support 60% of remuneration reports put forward by FTSE 350 companies. It recommended against 37% of nomination committee chairs.
