Legal & General Investment Management (LGIM) said that this year's "shareholder spring" highlights a need for a stronger correlation between chief executive pay and long term performance.

Sacha Sadan, LGIM's director of corporate governance, said at a briefing in the group's offices yesterday that problems occur when there is a misalignment of management pay and shareholder returns.

"LGIM is supportive of paying management for performing well. We want companies to have the best management, and for those managers to benefit as shareholders benefit. But we believe that engagement, transparency and alignment of interests will be better for everyone," said Sadan.

"The shareholder spring was perhaps the best example of how shareholders can help end contentious pay awards," added Sadan.

The push for change does not just stem from LGIM, but is being increasingly voiced by shareholders (pension schemes) themselves, explained Sadan. "We see a huge increase from a low base."

Sadan also noted that behind the headlines there have been a growing number of companies that talk to their shareholders before they change their pay schemes.

"This meant that the actual number of 'no' votes reduced; in fact, a little over half of the companies we spoke to about remuneration altered their pay proposals before their AGM," said Sadan.

He added that he believed more companies will talk to their shareholders, slowly but surely, and that hopefully there will be fewer companies which will feature in "The List" of significant votes against remuneration reports.

The shareholder spring was a period when a series of AGM votes forced companies to reassess the connection between CEO pay and performance.

This period between April and May was an opportune time for shareholders to express their disapproval, especially since this is when nearly 250 companies hold their AGMs.

First published 04.10.2012

monique_simpson@wilmington.co.uk