The Investment Association is challenging the UK’s largest companies over how they reward their top brass ahead of the next AGM season as firms like Wetherspoons and Brooks Macdonald are being put on blast for their pay practices.
The IA wrote to the chairs of remuneration committees at FTSE 350 firms with its Principles for Remuneration, which spell out investors’ expectations every year on how companies should structure executive pay.
The announcement comes ahead of the upcoming 2020 AGM season when the majority of listed companies will bring new remuneration policies to a vote for the first time since 2017.
Wetherspoons chief executive Tim Martin has blasted shareholders voting against executive pay packages at his pub business, while within the investment industry Brooks Macdonald has faced a revolt over remuneration.
Investors want pay structures simplified
Chief among the IA’s concerns are simplifying pay structures, justifying the level of executives’ remuneration via “robust transparency on targets”, requiring departing directors to hold a portion of their shares for at least two years once they’ve left the company and broadening malus and clawback provision triggers.
While the UK trade body said “some companies” have listened to investors over the last few years and created clearer links between executive pay policies and a company’s long-term success, it said firms required a reminder that policies must meet investor expectations.
“We will continue to work constructively with all stakeholders to ensure companies’ pay plans meet their business needs and investors’ expectations,” said IA director of stewardship and corporate governance Andrew Ninian.
Wetherspoons boss mouths off against proxy advisers
The IA’s recent initiatives come as several listed companies are put on blast for their executive pay proposals.
Wetherspoons boss Tim Martin accused proxy adviser Glass Lewis of “financial illiteracy” after it urged shareholders to vote against the pub group’s pay policy at its upcoming AGM.
Glass Lewis said it was concerned by a “significant” pay rise for the FTSE 250 firm’s finance chief Ben Whitley for the third year running and the absence of performance targets for some share awards. Whitley, who was promoted to finance director in 2014 and has been with the company 20 years, saw his pay bumped up by 15.4% last year, boosting his salary to £220,000.
But Martin told the Sunday Times the proxy adviser was talking “complete bollocks”.
He told the newspaper that Whitley started from a low salary base that has been increasing over a number of years “towards what I hope will be a slightly lower level than the overpaid finance directors in the sector generally”.
He also took aim at Glass Lewis’ comments on the absence of performance targets. “The most toxic and damaging aspect of corporate governance is the obsession with targets,” said Martin. “In the pub sector they cause people to underpay staff, not to carry out essential repairs, and to try to artificially enhance profits.”
Shareholders revolt over Brooks Macdonald pay
Wealth manager Brooks Macdonald is another firm to face backlash over its executive pay. Shareholders staged a revolt at the Aim-listed firm’s AGM on 30 October, with 39% casting their vote against the pay structure of its top brass.
The other 16 resolutions, including re-electing chief executive Caroline Connellan, received unanimous support.
The DFM has struggled to get investors onside with its long-term incentive plans in the past. Last year an even larger percentage of shareholders (41.3%) voted against its remuneration report which Brooks Macdondald put down to an issue over dilution of shareholdings.
At the latest AGM the board once again acknowledged the resolution on senior pay had “received a significant number of votes against”.
In an RNS filing on the AGM results the board said: “Based on the AGM vote and the Board’s prior engagement with shareholders, the Board recognises the concerns raised and will continue to engage with shareholders and reflect on the feedback received.”
