Interactive Investor

A 50% cut in bonus, so why oppose this pay policy?

25th November 2022 10:54

Graeme Evans from interactive investor

Companies are having to be more inventive in their efforts to incentivise senior management, and one team of experts will not back this latest idea.

Associated British Foods (LSE:ABF) is to update its long-term bonus scheme after recent external events made it much harder to link executive pay to performance.

The FTSE 100-listed company pointed to the impact that Covid-19 and supply chain pressures created by the Ukraine war have had across its portfolio of businesses spanning retail, sugar, agriculture, ingredients and grocery.

As it expects this volatility to continue, it is putting a new restricted share plan before shareholders at the company’s AGM. This involves a 50% reduction in award value but removes the formula-based approach currently used in determining long-term incentives. 

Associated British Foods

When: 11am, Friday 9 December.

Where: Congress Centre, 28 Great Russell Street, London WC1B 3LS.

How to participate: A live broadcast will allow questions during the meeting, but shareholders using this facility will not be able to vote on the day. They should make sure their voting instructions are returned by 11am, Wednesday 7 December. As usual, the meeting will include presentations by management. More AGM details can be found here.

Who’s in the chair? Michael McLintock, the former M&G chief executive, has been in the role since April 2018.

How did the company do in the year to 17 September? Revenues rose 22% to £17 billion, including a 43% rise to £7.7 billion for retail chain Primark and 10% increase for food operations spanning ingredients, sugar and agriculture. Adjusted profits rose 49% to £1.36 billion, highlighting a robust recovery from the pandemic. The total dividend of 43.7p, which is 8% higher and includes 29.9p due for payment on 13 January, is three times covered by adjusted earnings per share of 131.1p. ABF also announced a £500 million share buyback.

How have shares performed? Down 30% to 1,324.5p (1,583p on Thursday).

How much is the boss paid? The salary of George Weston, who is the group’s fourth chief executive since it was founded in 1935, is due to rise by 3.5% on 1 December to £1.16 million. His total remuneration for the 2021-22 financial year came to £2.3 million, which included £1.1 million of cash and deferred shares based on 48.43% of the maximum annual bonus opportunity. Shares from the long-term incentive scheme did not vest.

What’s changing in the new three-year remuneration policy? The company is switching to a restricted share plan (RSP), which includes a 50% reduction in award value and removes a formula-based approach for long-term incentives. There are performance underpins and a two-year holding requirement on top of the three-year vesting period. Weston’s 2022-25 RSP award will be 100% of salary, a 50% discount from his long-term incentive (LTIP) award of 200% of salary. For the annual bonus, the personal element used to assess the award level will be removed entirely and a new ESG and strategic element will account for 15% of the plan.

Why’s the company ending the LTIP? The company says recent events have demonstrated how difficult it is to set effective targets for the LTIP scheme in a volatile environment. “The committee has a long history of robust use of discretion to both increase and decrease vesting outcomes. However, as the application of discretion has been challenged by investors, we considered a different approach to reflect our operating model.”

What’s the view of voting agencies? Glass Lewis believes shareholders can be reasonably satisfied by the rationale for the new RSP. However, it has reservations over the quantum after noting an elevated LTIP opportunity was used to secure the appointment of new finance boss Eoin Tonge. As this becomes an RSP opportunity of 125% of salary, it points to a knock-on effect for the chief executive. Despite Weston requesting any increase to his incentive opportunity is deferred for the time being, Glass Lewis is unable to recommend shareholders support the remuneration policy. It is in favour of the company’s annual remuneration report. 

How did last year’s AGM go? The directors’ remuneration report was backed with 88.64% of votes in favour.

How’s the company doing on diversity? The board meets the Hampton-Alexander Review by having at least 33% female representation and the recommendation of the Parker Review that all FTSE 100 boards should have at least one person from an ethnic minority background as a director. It aspires to increase female representation on the board to 40% by 2025 as recommended by the FTSE Women Leaders Review.


When: 11.30am, Tuesday 13 December.

Where: Solar House, Fieldhouse Lane, Marlow, Buckinghamshire SL7 1LW.

How to participate: Questions in advance of the meeting should be submitted to by 11.30am on 12 December. Proxy voting instructions need to be returned no later than 11.30am, Friday 9 December. More AGM details can be found here.

Who’s in the chair? Martin Hellawell is hosting his last Softcat (LSE:SCT) AGM. He took on the role in 2018, having been managing director and then chief executive of Softcat from 2005. He will be succeeded next August by current chief executive Graeme Watt, who is due to be replaced in his current role by chief financial officer Graham Charlton.

How did the company do in the year to 31 July? Revenues were 37.5% higher at £1.08 billion, with the three divisions spanning software, hardware and services all growing in excess of 15%. Gross profit, which is the company’s primary measure of income, lifted 18.4% to £327.2 million and basic earnings per share improved 14.7% to 55.5p. A final dividend of 16.6p is due to be paid on 19 December, lifting the total for the year by 14.9% to 23.9p a share. A special dividend of 12.6p means £401.2 million will have been returned to shareholders since the company listed on the stock market in 2015.

How have shares performed? Down 28% to 1,395p (1,304p on Thursday).

How much is the boss paid? A 5% increase means Watt will receive a basic salary of £551,403 in his final year as chief executive. His total remuneration for the 2021/22 financial year came to £2.87 million, which included an annual bonus of £756,210 in cash and deferred shares based on 96% of the maximum opportunity. The final figure also featured the vesting of long-term incentives worth £1.55 million. The fee paid to the chairman has been increased to £200,000, having been “materially below” the lower quartile for the FTSE 250 at £159,135.

What’s the view of voting agencies? Glass Lewis is unhappy that CEO Watt will become chair next summer, against the recommendations of the UK Corporate Code. It said: “While we understand the desire for continuity and acknowledge the board's efforts to consult with shareholders about its succession planning, we strongly believe the company should appoint a qualified non-executive director, who was also independent upon appointment, to chair the board.” For this reason, it recommends shareholders vote against the re-election of Karen Slatford, who leads the nomination committee. It is in favour of the company’s remuneration report as well as the binding vote on minor changes to a new three-year remuneration policy.

What’s the company said about Watt’s appointment as chair? “Graeme’s deep knowledge of the business, Softcat’s culture and its markets made him the ideal candidate to support the interests of all our stakeholders.”

How did last year’s AGM go? The annual remuneration report was approved with 97.36% of votes in favour.

How’s the company doing on diversity? The gender breakdown of the board is 57% female, declining to 22% for the senior leadership team. One member of the board is from a minority ethnic background.

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