AstraZeneca has suffered a significant shareholder revolt over plans to increase the potential pay of Sir Pascal Soriot, its well-regarded chief executive, to as much as £18.5 million this year.
More than a third, or 35.6 per cent, of voting shareholders at its annual general meeting opposed the FTSE 100 drugs company’s new three-year executive remuneration policy. It includes raising the annual potential maximum performance share award to up to 850 per cent of Soriot’s salary, from 650 per cent previously.
The opposition came after concerns were expressed by Institutional Shareholder Services and Glass Lewis, the proxy advisers, with the former calling it “unprecedented in the FTSE”, and despite the Florida-based GQG Partners, a top-20 shareholder, saying that Soriot, the highest-paid FTSE 100 boss, was “massively underpaid”.
Although the resolution passed with 64.4 per cent approval among voting shareholders, it means AstraZeneca has faced a large shareholder rebellion to its pay plans on consecutive occasions, having had almost 40 per cent oppose its last policy in 2021.
The significance of the vote had risen in recent days. It was being seen as a test of whether shareholders plan to back their boards, which claim that they need to raise executive pay as they compete for global talent, or to heed the warnings of the proxy advisers, whose influence and role has been called into question.
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Pay policies from both Ocado and Smith & Nephew, the FTSE 100 medical equipment maker, which are being put to shareholders in the next few weeks, also face opposition from proxy firms. Glass Lewis and ISS have urged shareholders to vote against the online grocer’s proposed pay policy, raising concerns that it could lead to “excessive pay”.
The new Ocado scheme includes a bonus share award of up to £14.8 million for Tim Steiner, its chief executive. Shareholders have pushed back repeatedly against Steiner’s pay in the past, including in 2020 when he took home about £59 million for the previous year.
Shareholders have been urged by ISS to vote against an “excessive” pay rise for Deepak Nath, the United States-based boss of Smith & Nephew, who could be paid up to $11.8 million next year if all targets are met. Smith & Nephew, which is on its fourth chief executive in five years, wants to increase pay for US-based executive directors closer to American levels.
Underlining the difference in executive pay culture across the Atlantic, ExxonMobil, the oil major, disclosed that Darren Woods, its chief executive, had received $36.9 million in total pay for 2023, up almost 3 per cent.
Before AstraZeneca’s shareholder meeting at the Kia Oval, in south London, the Cambridge-based company had announced plans to increase its dividend this year by 20 cents, or 6.9 per cent, to $3.10 per share, which it said underlined “the company’s confidence in its performance and cash generation”.
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Soriot, 64, has been credited with overseeing the transformation of the company into one of the most valuable groups on the London Stock Exchange through the revival of its drugs pipeline and portfolio, helping patients and shareholders. He also succeeded in rebuffing a takeover approach a decade ago from Pfizer, an American rival, whose market value is now smaller than AstraZeneca’s.
Shares in AstraZeneca have risen by 268 per cent since he was appointed in October 2012, compared with a 36 per cent advance for the wider FTSE 100. The stock closed up 230p, or 2.1 per cent, at £109.62.
Soriot was paid almost £16.9 million last year, bringing the total made since he took charge to about £135 million.
Lindsey Stewart, director of investment stewardship research at Morningstar, the financial services group, said: “It’s fair to say that Soriot is one of the more successful FTSE 100 CEOs in recent years, so it’s unsurprising that comparisons are being made with his higher-paid peers in the US. Overall, it appears that many institutional investors and the proxy advisers are more comfortable with the status quo on UK corporate governance than with the changes being proposed.”
A spokeswoman for AstraZeneca has said the new pay policy “reflects the need to be competitive in the global market for talent and our compensation is structured to reward performance”.
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The company thanked “the majority of our shareholders” who supported its pay policy and said it would continue to engage with “shareholders and the proxy advisers to explain our need for global benchmarks and pay for performance, which is driven by the policy”.
