Proxy advisers inflict ‘serious harm’ to UK, says AstraZeneca chair

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AstraZeneca’s chair has hit out at proxy advisers for “double standards” that “do serious harm” to the competitiveness of UK companies, after more than a third of the company’s shareholders voted against a potential £1.8mn pay rise for chief executive Pascal Soriot.

Influential shareholder advisers ISS and Glass Lewis recommended that shareholders block the pay package for the company’s long-standing CEO, with Glass Lewis saying the scale of the increase in incentive-based payments was “excessive”.

But in an article for the Financial Times, Michel Demaré said the advisers “often make inconsistent voting recommendations between markets: advising shareholders to vote against pay policies at FTSE-listed companies but supporting US and Swiss businesses that typically have higher compensation levels and a lower degree of performance-indexed pay”.

He added: “We do not compare ourselves with the top companies of the FTSE, the narrow approach taken by the proxy agencies, and one irrelevant to the decisions of our current and future employees.”

Although the pay deal was approved, the shareholder revolt followed a similar dispute in 2021, when advisory groups also recommended that investors block Soriot’s pay package.

It illustrates the tension between UK companies attempting to retain and attract global talent and shareholders accustomed to lower payments for UK executives.

Under the approved plans, Soriot could earn a maximum of £18.7mn. He is entitled to annual incentive payments based on long-term performance worth up to 850 per cent of his almost £1.5mn base salary, compared to the maximum of 650 per cent under the previous policy.

He is also in line for a bonus worth up to 300 per cent of his base salary, compared with the previous 250 per cent rate, provided targets are met.

In recommending that investors oppose the plans, ISS said it acknowledged that AstraZeneca, the UK’s second-largest public company by market value, has “a global reach, is in a high-paying sector, with a particularly well-regarded CEO at the helm”, but added that it remained concerned by “the scale of the increase”. Soriot’s remuneration was already “competitive against European peers”, it said.

Soriot was the FTSE’s best-paid chief executive for the financial year ended in 2022, the last year for which figures are available from all companies. AstraZeneca has a market capitalisation of £171bn.

Although payment reporting standards differ between countries, Soriot receives higher pay than totals reported for other European pharmaceutical executives but is paid slightly less than some US peers.

The Frenchman was “massively underpaid” given the performance of the business under his watch, Rajiv Jain, chief investment officer at top-20 shareholder GQG Partners, said before the vote.

ISS and Glass Lewis did not immediately respond to requests for comment.

Legal & General Investment Management, a top-10 shareholder in AstraZeneca, told the FT that it had decided to back the new remuneration policy.

But it warned that the decision had been challenging and it would “not hesitate to vote against the remuneration report in the future, should we consider his pay no longer reflects company performance or evolving market norms”.

It said its decision was an endorsement of Soriot and AstraZeneca’s performance over the past 12 years, rather than providing backing for higher pay going forward: “We would like to emphasise that we do not expect an incoming CEO to be automatically awarded the same remuneration package as Mr Soriot.”