It’s been a little while since Cityblogger has heard the expression Fat Cat, albeit in the presence of the somewhat rotund young Tiddles, but the phrase is once again to be found on disgruntled lips in the City.

Some companies stand accused of trying to push through excessive pay packages to retain directors. And shareholders, such as those at GlaxoSmithKline and Royal Dutch Shell, are taking a stand, as witnessed this week. A substantial group of investors stamped their feet at the latest GSK AGM yesterday and refused to agree to a payoff of about £2.5m in shares for Chris Viehbacher, head of the drug giant’s US pharmaceutical division, who lost out to Andrew Witty in the battle to take over from JP Garnier as chief executive.

14 per cent of votes cast were against the remuneration report, although the share package was ultimately ratified as, excluding those who abstained, 86 per cent of votes were in favour of approving the report. However, Royal Dutch Shell did not get such an easy ride earlier this week when shareholders halted plans to award three directors nearly £2m of shares.

GlaxoSmithKline, of course, has a history of shareholder revolts on pay. Investors refused to vote through a £11m golden handcuffs deal for JP Garnier back in 2003, and the drug giant was forced to back down.

But institutional investors say this is a growing movement rather than a few isolated incidents. “I think you will see more of this,” says Jan Luthman, director of Walker Crips Asset Management. “There is a shift in attitudes and awareness. It ranks up there with being green and [concern over] carbon footprint. If you are an institutional investor in a company and directors are trying to over-reward themselves, then shareholders have to be seen to be making a stand against it. There’s an increasingly jealous sentiment building up towards the financial industry, with banks being the chief offenders in the eyes of the public. The view is that the poor are being penalised and the rich rewarded. And that this great mass of unknown grey people is making money on profits that were never there, and then expect the taxpayer to bail them out when things go wrong.”

However, Mr Luthman accepts that often companies have to pay well to attract talent. “This is a global market,” he says. “These human skills are rare and these people can and do move. They are mobile in a way that they’ve never been before. The world of business and finance has changed dramatically. But is it fair to pay somebody the best part of a million pounds to stay in his job? Reward structures have to be appropriate and directors that seek to over-reward themselves invite adverse media comment and risk the company’s reputation.”

Watch out fat cats!

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