Vodafone risks becoming the biggest company this year to fall victim to City unrest over boardroom pay amid continuing fury at the mobile communications giant’s decision to slash its dividend.
Sky News has learnt that a number of large institutional investors plan to oppose Vodafone’s remuneration report at its annual meeting later this month.
The influential proxy adviser ISS has recommended that investors vote against the resolution on pay, fuelling the likelihood of a large-scale revolt.
In a note circulated to clients this week which has been seen by Sky News, ISS said support for the remuneration was not considered warranted because the number of shares awarded to bosses under Vodafone’s long-term incentive plan last month was significantly higher than a year ago.
That was the consequence of a sharp fall in its share price, with ISS arguing that “when there has been a material decline in a company’s share price, remuneration committees should consider reducing the size of LTIP awards at the time of grant”.
According to ISS, Vodafone’s pay committee said it believed the most appropriate time to use discretion on share awards was at the point of vesting rather than at grant.
“The committee has committed to use downward discretion if the value of an award is considered excessive or unwarranted,” ISS quoted the company as saying.
The looming pay row adds to a series of headaches facing board members including Nick Read, who replaced Vittorio Colao as the company’s chief executive last year.
Investors are furious that Mr Read announced a 40% dividend cut in May despite a pledge eight months ago that the payout to shareholders was adequately covered.
Vodafone shares have fallen by nearly a third during the last 12 months, giving it a market value of about £35bn.
If there is a revolt by at least 20% of shareholders at its AGM, it would make it the largest company by market capitalisation to be added to the Investment Association-supervised register of corporate dissidents.
The next-largest, Barclays, saw nearly 30% of shareholders oppose its pay report earlier this year.
Vodafone is close to completing an €18.4bn deal to buy Liberty Global assets in Germany and eastern Europe – a transaction that some investors believe is flawed because of the strain it has placed on the company’s balance sheet.
Vodafone declined to comment.