The 2016 UK AGM season has hardly begun and already two major shareholder revolts have surfaced at FTSE 100 issuers. In one of the most publicised spats over executive pay in recent years, a number of BP plc shareholders voiced their displeasure over the level of pay awarded to Bob Dudley, the company’s CEO, in the lead up to the Company’s 2016 AGM. As a result, the passing of the remuneration report was always likely to be a close-run affair. Investors of all shapes and sizes were angered by the clear disconnect between increasing pay and tumbling financial performance, exemplified by the maximum payouts under the company’s bonus plan and the reporting of a $6.5 billion loss. When the votes were announced, investor discontent was even higher than expected, with shareholders resoundingly rejecting the Company’s advisory proposal on the remuneration report– in total, just shy of 60% of voting shareholders registered against votes at the Company’s heated AGM.

Voting at the Smith & Nephew AGM took place only hours later, and shareholders at the medical-device maker followed the lead of their counterparts at BP, although for materially different reasons. Here, the rebellion focused on the remuneration committee’s decision to override the formulaic outcome of the long-term incentive plan, which stipulated that awards would only vest if TSR was at or above the median of a small, bespoke peer group. After the peer group shrank due to market consolidation and the Company found itself below the median of the partial group, the committee exercised its discretion to permit awards to be released as if the median target had been met. The committee’s detailed disclosure regarding its decision, which included pointing to the company’s significant outperformance of the FTSE 100 and S&P 500, did not placate shareholders’ clear unease surrounding any discretionary uplifts in pay, which remains a red button issue for UK and international shareholders alike.

Prior to Thursday, only seven FTSE 100 companies had failed to secure approval of their remuneration report and the two defeats within hours of one other will undoubtedly call to mind memories of the 2012 AGM season, referred to as the “shareholder spring” due to a spate of revolts relating to executive pay, some of which engendered CEO resignations. It is too early to assess the full extent of the fallout from these latest shareholder rebellions; however, while the proposals were put to shareholders on an advisory basis, it is clear that remuneration structures and levels of pay continue to be areas under intense scrutiny from both investors and the general public, and have the ability to cause a level of discomfort for board members through major PR hiccups.

Both companies expressed their disappointment with the results, while committing to increased dialogue with investors over the coming months; however, both also stood over the decisions made in the past fiscal year. As such, speculation remains rife as to potential board changes in light of the defeats, particularly with regard to remuneration committees who have overseen payments and decisions that have driven some of the highest levels of shareholder discontent the UK market has seen; the Institute of Directors, a body representing company directors, has gone as far as to state that the reaction of BP’s board “will determine the future of corporate governance in the UK.”

It remains to be seen if an increased focus on engagement with shareholders in advance of the 2017 AGMs, when both companies will be required to seek shareholder approval of their remuneration policies on a binding basis, will lead to a softening of shareholder anger. One thing is for certain however, an early shot has been fired across the bow of UK boards: Pay remains a highly contentious issue, and one which shareholders are willing to provide management with bloody noses and public embarrassment over.