Supermarket giant Sainsbury is still in the dog house with the UK's institutional investors despite last week's resignation of its chairman, Sir Peter Davis, over the scandal of his £2.4 million 'performance-related' bonus.
After discussion with its members and with the company, the Association of British Insurers (ABI) has today placed a so-called 'red top' warning on the remuneration report for Sainsbury's forthcoming annual meeting.
A red-top indicates serious levels of shareholder concern with remuneration.
The ABI, whose member companies hold more than a fifth of all investments traded on the London Stock Exchange, said that there remain concerns about the process whereby Sir Peter was scheduled to receive a sizeable award of shares at a time when the company’s profits had fallen.
In particular shareholders will question why performance targets, which the company had said would be stretching and demanding, actually led to a large award of shares at a time of profits weakness.
The ABI's Head of Investment Affairs, Peter Montagnon, said that a particular concern of ABI members is that failure to match remuneration to performance will discredit the whole process of executive remuneration and undermine the abilities of companies to reward success appropriately.
"There is a risk of the entire system of remuneration falling into disrepute. We cannot afford for that to happen, if we are to continue to attract and reward talent in running listed companies,” he said.