Interactive Investor

Are these two high-flying CEOs in for another rough ride?

After a significant revolt at last year’s annual general meetings, we’ll soon find out if shareholders have calmed down enough to wave through latest pay deals? Graeme Evans reveals what the voting agencies think.

19th January 2024 08:37

Graeme Evans from interactive investor

Shareholders will be heading to Luton Airport and Twickenham Stadium early next month when FTSE 350-listed easyJet (LSE:EZJ) and Compass Group (LSE:CPG) stage their annual general meetings.

Both companies will be keen for an easier ride than they experienced in 2023, when votes on their remuneration reports saw significant levels of shareholder dissent.

An increase in future long-term incentive awards contributed to the Compass protest, while some easyJet shareholders were believed to be unhappy that chief executive Johan Lundgren got an incentive payout in relation to the 2021/22 financial year.

The companies go into this year’s meetings buoyed by strong financial results, leading to Lundgren getting a total of £2.2 million and Compass CEO Dominic Blakemore £7.5 million.

Compass

When: 12 noon, Thursday 8 February.

Where: Twickenham Stadium, 200 Whitton Road, Twickenham, Middlesex TW2 7BA.

How to participate: Proxy voting instructions should be returned no later than 12 noon, Tuesday 6 February. More AGM details can be found here

Who’s in the chair? Ian Meakins, the former chief executive of Wolseley, Travelex and Alliance Unichem, took on the role at Compass in December 2020.

How did the company do in the year to 30 September? The contract catering company, which employs 550,000 people in 35 countries, lifted underlying revenues by 18.8% to £31.3 billion following above-average net new business growth of 5% and like-for-like volumes and pricing growth of 7%. Operating profits rose 29.6% to £2.1 billion and earnings per share by 32.5% to 86.1p. Free cash flow was 39.4% higher at £1.2 billion and the annual dividend increased by 36.8% to 43.1p, including the 28.1p due for payment on 29 February.

How have shares performed? Up 12% to 2,000p (2,175p on Thursday).

How much is the boss paid? Chief executive Dominic Blakemore’s salary for 2024 has increased 5.9% to £1.16 million. His single figure of remuneration for 2022/23 amounted to a decade high for the CEO’s role of £7.5 million, up from £3.3 million the previous year when long-term incentives lapsed for the third year in a row. This year’s incentives vested at 100% of the maximum opportunity, contributing £4.1 million to the final figure. His annual bonus was the full amount of £2.1 million, one-third of which is deferred into shares.  

What about American management? Gary Green, who stepped down in November after four decades with the business, got £7.3 million in his final full year with the group. This included variable pay of £5.82 million. His successor as chief operating officer for North America is finance boss Palmer Brown, who joined Compass more than 20 years ago and has been appointed on a salary of $1.4 million (£1.1 million). Compass said the salary, which is 14% below the level previously paid to Green, reflected the size and scale of its North America operations and the “hot” market for talent in the region.

How did last year’s AGM go? Some 30% of shareholder votes were against the annual remuneration report. This followed an increase in the chief executive’s future long-term incentive awards from 300% to 400% of salary, a change made under the remuneration policy that was backed with 67.50% of votes at the 2022 AGM. 

How has the company responded to the dissent? The company acknowledges that executive pay is a topic which attracts strong and often differing opinions amongst investors. It continues to seek an approach which is measured, fair, and supports the sustainable delivery of the company's long-term strategy. Compass adds that the base salary and total target remuneration of the group CEO is in the lower quartile of the FTSE 30.

What’s the view of voting agencies? Glass Lewis recommends shareholders vote in favour of the annual remuneration report. 

How’s the company doing on diversity? Female board representation improved to 38% at the end of September, with the company hopeful of meeting the required 40% within the coming year. At least one director is from a minority ethnic background.

easyJet

When: 10am, Thursday 8 February.

Where: Hangar 89, London Luton Airport, Luton, Bedfordshire, LU2 9PF.

How to participate: easyJet will be offering facilities for shareholders to attend and vote at the AGM electronically. Shareholders are encouraged to submit their voting instructions as soon as possible, with the deadline for doing so 10am, Tuesday 6 February. More AGM details can be found here.

How will EU ownership rules impact shareholders? EU regulations require all airlines with EU operating licences, including easyJet, to be majority owned and controlled by nationals of one of the member states of the EU. To ensure that it keeps to the permitted maximum 49.5% of non-EU ownership, easyJet has an EU ownership contingency plan where it suspends voting rights in respect of certain shares. This is on a "last in, first out" basis, with those affected notified by post. More details on the contingency plan can be found here.

Who’s in the chair? Former Royal Bank of Scotland and RSA Insurance chief executive Stephen Hester has been in the role since December 2021.

How did the company do in the year to 30 September? Revenues increased by 42% to £8.2 billion, predominantly due to pricing strength, increased flown capacity, improved load factors and the growth of easyJet holidays. The headline pre-tax profit of £455 million represented a £633 million year-on-year improvement. Shareholders are to receive their first dividend since the pandemic after the company announced plans to pay 4.5p a share on 22 March.

How have shares performed? Up 50% to 427.3p (498.4p on Thursday).

How much is the boss paid? Johan Lundgren’s base salary has increased 4% to £780,000.  His total remuneration for 2022/23 amounted to £2.2 million, including cash and shares worth £1.3 million after the annual bonus scheme paid 85% of the maximum opportunity. Awards granted in 2020 under the company's former long-term incentive plan lapsed after the threshold target on total shareholder return performance was not met. 

How did last year’s AGM go? There were 19.41% of votes against the annual remuneration report. The company said some shareholders were either uncomfortable with the level of incentive payout in the year or did not support the Restricted Share Plan (RSP), which was approved at the 2022 AGM and will vest for the first time in December. The face value of the RSP award granted to Lundgren in the 2023 financial year was 125% of salary, subject to liquidity and governance underpins as well as a two-year holding period.

What’s the view of voting agencies? Glass Lewis recommends shareholders vote in favour of the annual remuneration report.

How’s the company doing on diversity? The company has met the FTSE Women Leaders target of having at least 40% of board roles held by women, including one of the senior positions. At least one member of the board is from an ethnic minority background.

SSP

When: 10am, Tuesday 30 January.

Where: Travers Smith, 10 Snow Hill, London EC1A 2AL.

How to participate: Proxy voting instructions should be returned no later than 10am, Friday 26 January. More AGM details can be found here.

Who’s in the chair? Mike Clasper, the former chief executive of BAA, has held the role at SSP Group (LSE:SSPG) since February 2020.

How did the company do in the year to 30 September? The operator of food outlets in airports and other travel locations recorded revenues of £3 billion, up 38% on last year after trading ahead of pre Covid-19 levels throughout the period. Operating profits jumped to £164 million from £30 million a year earlier and earnings per share rose by 11.6p to 7.1p a share. The strong recovery in profitability and earnings resulted in the proposed resumption of dividend payments, with shareholders due to receive 2.5p a share on 29 February. 

How have shares performed? Up 9% to 202.6p (220.2p on Thursday).

How much is the boss paid? The salary of Patrick Coveney, who joined the group in March 2021, increased in June by 3.5% to £802,100. His single figure of remuneration for 2022/23 amounted to £2.35 million, the highest for the CEO’s role since Kate Swann received £5.3 million in 2019. His total included £1.3 million in cash and deferred shares after the annual bonus scheme paid 96% of the maximum opportunity. He did not participate in the company’s 2021 Restricted Share Plan, although his deputy Jonathan Davies is due to receive an estimated £378,000 as part of his £1.7 million total remuneration for the year. Davies has been chief financial officer since SSP’s formation within Compass in 2004. 

What’s in the new remuneration policy? The remuneration committee regards the policy, which was last approved at the 2021 AGM with 90.21% support, as effective in rewarding and retaining top talent. It is not proposing any significant changes, adding that the use of a Restricted Share Plan on longer-term variable pay continues to be the right approach.

How did last year’s AGM go? The annual remuneration report was approved with 98.20% of votes in favour.

What’s the view of voting agencies? Glass Lewis recommends shareholders vote in favour of the annual remuneration report and the binding resolution on the new three-year remuneration policy.

How’s the company doing on diversity? Women hold half of boardroom roles, including the position of senior independent director. The company also meets the recommendation of the Parker Review on ethnic representation.

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