This is no idle threat from the Church Investors Group (CIG). Its members include the main investing bodies of the Church of England and the Methodist Church and together they currently have around £21bn in investment assets.
Under its new voting strategy for 2019, the group will refuse to re-elect directors where the company does not comply with best practice, it says.
It has tightened up its voting policy in six key areas. Corporate tax transparency features for the first time in the template, alongside tough new actions relating to climate change, Living Wage accreditation, and disclosure of the difference in pay between the chief executive and the average employee.
In some situations, the CIG intends to widen its action beyond UK borders. So, for instance, it will vote against the chairs of both FTSE 350 and the US Russell 50 (an index of the Largest American companies) where there is a lack of tax transparency.
It will adopt a similar line against the nominations committee chair in companies that do not have at least one female director on the board. It will apply this policy not just to UK-based companies but also to companies that are constituents of the main indexes in Europe, the US, Australia and New Zealand.
CIG will also encourage companies to adopt the revised Corporate Governance Code early and expects them to respond quickly to investors’ concerns, expressed through a 20% or more vote against management, and rectify areas of high concern.
It adds that it continues to take a hard line on excessive executive remuneration. Last year its members voted to withhold support from more than 60% of FTSE 350 remuneration reports, and it refuses to support remuneration reports where the CEO is awarded a pension payment of more than 30% of their salary.
“Ultimately a company’s licence to operate depends on the confidence of the public and its long-term contribution to the common good,” said the Revd Canon Edward Carter, who chairs the CIG.
“Our voting template for 2019 sends a strong signal to companies about the issues where we want to see change. Climate change, diversity, remuneration and corporate tax are areas that concern not only fairness but also the mitigation of risk to the companies themselves and wider society.
“As asset owners, we will continue to press with our votes the need for companies to act responsibly and work not only for the benefit of shareholders but also contribute to the wider common good in both the short and long term.”
The group’s decision to take a tougher stance reflects a growing public disenchantment with companies that have ignored the changing demands of society.
The Investment Association, which set up the public register of investor revolt at the behest of government, named and shamed FTSE 100 companies Astra Zeneca, Berkeley Group and WPP as “repeat offenders” three months ago after they had appeared on the register two years running for the same reason.
A further 29 FTSE All-Share companies were outed at the same time. The Association suggested that they were not taking sufficient account of their shareholders’ views and warned them that they risked facing more shareholder rebellions in the future.
The repeat offenders list showed the issue that most commonly riled shareholders was the remuneration report (15 cases), closely followed by director re-election (14).
The FTSE 350 were also taken to task in November by Sir Philip Hampton over their slowness in bringing women on to the board.
Sir Philip, who heads up the government-backed Hampton-Alexander Review, said that unless the FTSE 350 had an immediate change in policy, they would likely not reach the 33% target the Review had set for 2020.
As his report pointed out, half the appointments to board positions over the next two years would need to be women if the FTSE 350 were to have a chance of succeeding. Currently around 65% of all newly available executive roles go to men.