River & Mercantile is going ahead with a revised executive pay scheme despite almost 40% of shareholders opposing the plans at the company’s AGM.
At the firm’s AGM on Monday, with just under three quarters of eligible votes cast, 37.8% voted down the resolution to approve the directors’ remuneration policy, while 62.2% were in favour.
A further 36.7% of shareholders came out against a related “value transformation plan” that would see directors be able to claim revenue growth above a fixed hurdle.
In an RNS announcement, R&M said: “The board welcomes the majority support for our new directors’ remuneration policy and value transformation plan. However, we recognise that not all shareholders were supportive of the directors’ remuneration policy and the value transformation plan. We note that there were a significant number of votes received against these resolutions.”
R&M’s existing remuneration arrangement for executive directors, put in place in 2017, includes executive director participation in the performance fee remuneration pool.
Writing in the firm’s annual report and accounts for 2020, published in October, R&M remuneration committee chair Miriam Greenwood said: “Certain elements of our existing remuneration policy have been problematic both in concept and application for both shareholders and the company.”
The new policy will see a reduction in maximum cash bonus opportunity from 300% of base salary to 250% of base salary of which half are in shares.
It also includes a one-off five-year value transformation plan sharing in the growth in value created above a 12% per annum compound total shareholder return hurdle rate, where the sharing percentage is up to 6%. This resolution was approved by 63.3% of shareholders at the AGM.
A reduction and alignment of pension contributions with the wider workforce, currently 5% of base salary, has also been included under the revised policy. So has the ability for the remuneration committee to exercise its discretion to override formulaic remuneration outcomes where necessary.
In 2019, following shareholder concerns, R&M removed performance fee remuneration as a specific element of variable pay for executive directors and instead, it treats performance fees earned as being part of the total revenue for the group.
Greenwood also said in the annual report, the inclusion of a group wide remuneration cap of 54% of net management and advisory fees plus 50% of performance fees “constrains the group’s ability to invest and retain high calibre individuals to develop and execute on our strategic objective to deliver value to investors through profitable growth”.
As part of a review to simplify the structure, the firm has decided to remove the group wide remuneration ratio cap from its existing policy, but Greenwood said “the formal removal of this cap from the policy does not pave the way for unconstrained remuneration growth across the group”, adding “individual caps on variable remuneration will continue to be operated”.
The RNS said: “The board will further reflect upon the feedback provided by shareholders. The remuneration committee will consider the views of our major shareholders on performance measures and objectives when determining the performance measures for objectives related to the annual bonus. The board will continue to engage with its major shareholders to further understand their views on executive director remuneration.”
