Expert Corporate Governance Service (ECGS)
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Aviva - AGM 23 May 2019


Mr. Mark Wilson stepped down as CEO on October 8, 2018 and Mr. Maurice Tulloch was appointed on March 4, 2019.  Mr. Adrian Montague served as Executive Chairman during the search for a new CEO. He is now serving as non-executive Chairman again.

 Item 2: Approve the remuneration report

The structure is unacceptable as the maximum bonus exceeds guidelines and accelerated vesting is possible. Disclosure prevents evaluation of whether the use of qualitative criteria exceeds guidelines and whether the bonus payout is adequately aligned with performance. Both the STI and LTI use EPS as a performance metric.  Over-reliance on EPS could result in management making decisions to maximize profits for the short term, often at the expense of long term shareholder value. EPS can be positively influenced through share buybacks, fluctuations in foreign exchange, or amendments made to accounting rules & regulations. Performance is not measured against a peer group or other relevant benchmarks.  Accordingly, we recommend that shareholders oppose this resolution.

 Items 22 and 23: Authorities to cancel preference shares

In March 2018, the Company announced that it was considering cancelling £450m of preference shares at par value in order to save the Company £38m a year in coupon payments.  Their intention was to put this to a vote.  As ordinary shareholders would also have been able to vote, along with preference shareholders, it is likely they would have voted in favor to reduce the Companyns costs.  However, the proposal was highly criticized and the Company changed its plans only a few days later. 

Following this, the CEO of the Financial Conduct Authority warned preference share-issuers like the Company that they need to be aware of market abuse regulations, especially those relating to insider information, if they wish to cancel the investments.

The Company has compensated investors who incurred losses by selling their preference shares during the period between the two announcements with £10m in goodwill and administration costs.  They now state that, rather than cancelling the shares, they will lobby for these shares to continue to be considered capital after 2026.

At the current AGM, the Company has requested the authority to make market purchases of up to 100% of its 8¾% cumulative irredeemable preference shares and 8 3/8% cumulative irredeemable preference shares. The Board states that the purpose of this resolution is to provide the Company with flexibility in managing its capital.  Taking into consideration the interests of ordinary shareholders, we recommend support.

Aviva PLC

Aviva is a holding company. Through its subsidiaries, Co. provides customers with long-term insurance and savings, general and health insurance, and fund management products and services. Co.'s long-term insurance businesses provide a range of life insurance and savings products, which include annuities, equity release, pensions, protection, bonds and savings, and investment sales. Co.'s general insurance business operates under the Aviva brand and focuses on personal lines, commercial lines, health insurance, and corporate and specialty risks. Co.'s Aviva Investors, its asset management business, provides asset management services to Co.'s long-term insurance and savings, among others.


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