One of the suggestions made by Vince Cable when answering his parliamentary question in the House of Commons yesterday in relation to his proposals to address executive pay, was that the remuneration report may be subject to a higher support threshold than currently. This has some echoes of Australia's two-strikes rule, which states that if a remuneration report records 25% against votes over two years, there is a "board spill" resolution which if passed would force all directors to stand for re-election. In it's Response to the BIS Consultation Manifest supported this kind of "cause and effect voting" as it would encourage better engagement from both companies and shareholders.

The UK proposals seem to suggest that "support" may refer to votes For minus Dissent i.e. both against votes and abstentions. Manifest data has shown the impact of this in recent years - in 2011, approximately 10% of FTSE All-Share companies would not have achieved the 75% level of support. Such a proposal would put pay resolutions on the same footing as, for example, schemes of arrangement, pre-emptive rights issues and amendments to articles of association.

Since the introduction of the mandatory advisory vote, some 67 FTSE 100 remuneration report votes would have failed to achieve the required support threshold, whereas based on the current majority requirement (For votes exceeding against votes, abstentions disregarded), only 3 FTSE 100 firms have lost the vote (GlaxoSmithKline in 2003, Royal Dutch Shell and Royal Bank of Scotland in 2009). 

75% Support Achieved - Percentages of Remuneration Report Votes

Year FTSE 100 FTSE 250 FTSE SmallCap Overall 2002
(Voluntary votes) 100.00% 95.71% 92.31% 95.83% 2003 79.17% 86.41% 88.46% 85.99% 2004 94.90% 88.69% 88.52% 89.64% 2005 96.00% 94.74% 92.50% 94.01% 2006 97.96% 93.62% 95.96% 95.32% 2007 98.98% 95.85% 92.94% 95.12% 2008 95.92% 94.04% 93.50% 94.13% 2009 86.41% 90.30% 92.41% 90.43% 2010 91.92% 90.13% 90.22% 90.48% 2011 91.26% 87.11% 91.63% 89.64%

 75% Support Achieved - Numbers failing to achieve*

Year FTSE 100 FTSE 250 FTSE SmallCap Overall 2002
(Voluntary votes) 0 3 3 6 2003 20 25 27 72 2004 5 25 31 61 2005 4 12 18 34 2006 2 15 9 26 2007 1 10 18 29 2008 4 14 16 34 2009 14 23 17 54 2010 8 23 22 53 2011 9 29 17 55 *Where publicly disclosed. Historically some companies refused to disclose.