Investors in Britain's largest companies have rowed back on the protests over pay which most readily symbolized public distaste over perceived corporate greed during last year's 'shareholder spring'.

Research by Reuters has found that the average vote against executive pay deals at FTSE 100 annual general meetings has fallen by 18 percent from two years ago, even though surveys suggest earnings have continued to rise.

The decline in dissent comes shortly before shareholders acquire new powers to reject compensation policies.

With more than 70 percent of 2013 FTSE 100 AGMs completed, remuneration resolutions have drawn an average 'No' vote of 6.6 percent, down from 7.6 percent for the same companies in 2012 and from 8 percent for all FTSE 100 members in 2011.

As with other stock indexes, the British blue-chip benchmark's composition changes slightly from year to year.

These votes are still advisory, but from October reforms brought in by Britain's business secretary Vince Cable will give shareholders the power to reject any changes to a pay policy at the next company AGM, or to vote down an unchanged policy every three years.

No FTSE 100 pay vote in 2013 has so far seen objections reach the 50 percent threshold which would force a company back to the drawing board. Last year, a majority of shareholders at two companies, WPP (WPP.L) and Aviva (AV.L), voted against proposed pay deals for executives.

There is no clear evidence that the decline in voting levels reflects a fall in executive earnings, although some major investors credit efforts by companies to make changes and better engage with shareholders for the fall in protest votes.

A survey last week by consultancy MM&K and proxy voting firm Manifest found that average pay for UK CEOs in 2012 had increased by more than 10 percent from 2011 as an equity rally inspired by quantitative easing inflated earnings. Click here for more details: r.reuters.com/duj98t x Cable told Reuters there had been some evidence of pay moderation, particularly among new appointments. Barclays (BARC.L) CEO Antony Jenkins got a package worth 2.6 million pounds last year, for example - much less than the 17 million pounds his predecessor Bob Diamond took home in 2011.

But Cable warned that shareholders risk squandering their new powers if they lack the determination to challenge pay deals they perceive to be too generous or contrary to a firm's long-term interests.

"Our changes will help to create the right environment for long-term, responsible private sector growth, which will in turn support a stronger economy and a fairer society," said Cable, a Liberal Democrat member of the Conservative-led coalition government.

"The challenge is now for shareholders to engage with companies. We've given them the tools through our reforms but these will only work if shareholders are willing to use them."

When British companies faced their shareholders during the 2012 AGM season, it felt like revolution was in the air. Heads rolled and the phrase 'shareholder spring' was coined to echo the popular uprisings across the Arab world.

The average vote against pay deals actually fell compared with 2011, however, and the latest data shows a further decline so far this year.

"This does not bode well for the incoming regime of binding shareholder votes," said Alan Macdougall, managing director at PIRC, which provides voting advice to UK institutional investors and is a vocal campaigner for improved corporate governance standards.

"The willingness of many asset managers to nod through all but the most egregious remuneration policies means it would not be surprising to go through a whole season without a company being defeated.

"There is a real danger that unengaged asset managers undermine the credibility of shareholder oversight of pay," he told Reuters.

And it's not the case that shareholders have simply toned down their protests through the use of abstentions.

When abstentions are rolled into the total votes counted at FTSE 100 AGMs, the Reuters research shows that 2.2 percent of votes have been withheld so far this year on pay resolutions, a fall from 2.4 percent in 2012 and from 3.6 percent in 2011.

LEARNING THE LESSONS?

Angeli Benham is UK corporate governance manager at Legal & General Investment Management, the fund arm of the British insurer, which owns about 4 percent of UK shares. She said the decline was a function of last year's ructions.

Although the average vote against pay dropped in 2012, investors could be said to have picked their battles. Shareholder votes claimed the scalp of Aviva CEO Andrew Moss, forced WPP back to the drawing board on bonuses, and sent other companies scrambling to tweak pay arrangements as their turn on the AGM treadmill approached.

"A lot of the companies that I worked against last year, did come and chat to shareholders and most of them have made significant changes to their remuneration," said Benham.

"Other shareholders are now engaging more with companies... and companies that haven't engaged with us in the past are coming forward."

Investors suggest that some companies last year were playing catch-up with pay after restraint during the financial crisis, and were willing to stomach political anger and investor tutting in order to bring salaries to levels they deemed appropriate.

Historically, many investors have been loath to join a public vote against management and there were already expectations that this latest AGM season might fail to live up to last year's headlines.

Fund managers often claim to do their best work behind closed doors and highlight the need for pragmatism when voting on compensation for UK CEOs which is not out of step with payouts to peers around the world.

"It suits the status quo in both PLC remuneration committees and the investment management industry to pretend that the drop-off in shareholder opposition to pay is a sign of progress," said PIRC's Macdougall.

"Neither group really believes that there is a problem with pay, and so the token changes companies are willing to make are quickly banked as ‘wins' by asset managers."