Hargreaves Lansdown has awarded Chris Hill £306,000 worth of options as its clients remain trapped in the Woodford Equity Income fund, which the platform had championed via its Wealth 50 buy list of recommended funds.
Hill (pictured) was one of 10 executives, including chief investment officer Lee Gardhouse, handed options totalling £2.3m under the company’s “sustained performance plan”, according to a regulatory filing published this week. Gardhouse received £152,990 worth of options in the transaction on 3 February.
A Hargreaves Lansdown spokesperson said the options cannot be exercised for five years and would only vest “if strict criteria are met, including performance measures on client service”. Hill’s performance would also be assessed on asset growth between the award and vesting of shares and a “satisfactory risk, compliance and internal control environment”, according to the 2019 annual report.
The options are contractual, rather than discretionary, and the strike price is currently higher than the Hargreaves stock price, although the five years to maturity adds to their value.
Bonus period kicks off while Woodford investors remain trapped
But while the performance plan under which the options were awarded is forward looking it will still cover a period during which Hargreaves Lansdown clients are trapped in the Woodford Equity Income fund. While investors were handed £2.2bn in January, representing 75% of the fund value, the most illiquid holdings are yet to be sold – a process that is expected to take many months.
In June 2019, weeks after the Woodford Equity Income fund suspended, Hargreaves confirmed to Portfolio Adviser that Hill would waive his bonus “until investors are able to access their money”. But by the time Hargreaves issued its annual results for the year ended 30 June 2019, it had changed its position to limit the waiving of bonuses to that financial year.
Therefore, the bonuses were waived for 12 months in total with less than a month covering the period after 3 June when the Woodford Equity Income fund suspended.
Philip Johnson also waived his bonus alongside Gardhouse and head of research Mark Dampier, who had been the architect of the Wealth 50 and one of Neil Woodford’s most public champions. Dampier, who faced backlash for selling £5.6m worth of shares weeks before the fund suspended, did not receive options in the latest sustained performance plan, but Johnson received £216,732 worth.
Remuneration committee praised CEO performance
In Hargreaves Lansdown’s 2018 financial year, Hill raked in £680,000 in deferred bonuses on top of his £1m cash bonus, representing 81% of his base salary.
Despite the waiver of bonuses in 2019, the remuneration committee praised Hill for his “very strong performance” when it came to client satisfaction and client strategy.
The report specifically namechecked the launch of the Wealth 50 as one of his successes even though at the time the fund buy list was making headlines for its championing of Woodford Equity Income. Law firms Leigh Day and Slater & Gordon are currently investigating whether to launch a class action lawsuit against Hargreaves Lansdown over its championing of the Woodford Equity Income fund.
Almost 134,000 clients hold the Woodford Equity Income fund either directly or via the Hargreaves Lansdown multi-manager range.
The remuneration committee also said Hill had made strong progress “strengthening the governance and risk culture across the business” and had performed strongly in the objective of developing relationships with key stakeholders.
