Pandemic-era pay decisions continue to cause controversy amid criticism of Redde Northgate (LSE:REDD) for not adjusting a £3 million windfall for its boss Martin Ward.
Voting agency Glass Lewis believes the van rental and automotive services group should have used discretion in relation to long-term incentive awards, which were granted in August 2020 when shares were down at 186p during a year of stock market volatility.
They were 376p by the end of the three-year performance period, with Ward getting the maximum £3 million after targets under the scheme for both pre-tax profit and earnings per share were significantly exceeded.
Glass Lewis has recommended shareholders vote against the annual remuneration report but the company’s pay committee has defended its decision making.
It notes that shares were as low as 112p at one point in 2020 and that the progress for shares was more due to over-delivery of merger benefits and a strong trading performance. It adds that the rewards have been spread further afield after total shareholder return growth of 127% compared with 18% across the FTSE 250 index as a whole.
When: 8am, Wednesday 27 September.
Where: 5A The Parklands, Lostock, Bolton Lancashire, BL6 4SD.
How to participate: The deadline for the submission of proxy voting instructions is 8am, Monday 25 September. More AGM details can be found here.
Who’s in the chair? Geoff Cooper, the former chief executive of Travis Perkins, was appointed to the AO World (LSE:AO.) board in July 2016.
How did the company do in the year to 31 March? Revenues fell 17% to £1.14 billion, reflecting a new strategy involving the exit of some business lines. Adjusted earnings doubled to £45.4 million, with earnings per share from continuing operations of 1.13p compared with a loss of 0.75p the year before.
How have shares performed? Down 26% at 64.5p (86.3p on Thursday).
How much is the boss paid? The salary of founder and chief executive John Roberts increased in April by 4% to £510,427. His total remuneration for 2022/23 amounted to £1.12 million, including £569,428 in cash and deferred shares after the annual bonus scheme paid 79.3% of the maximum opportunity. The payout followed the achievement of the metrics of adjusted profit, customer net promoter score and targets relating to the AO business transformation. Roberts is the company’s third largest shareholder with a stake of 18.4%.
How did last year’s AGM go? Shareholders approved a new remuneration policy with 11.18% of votes against the resolution. The new plan updated the one agreed at the 2021 AGM in order to reflect AO’s exit from Germany and strategic focus on profitable growth and cash generation in the UK. Amendments to the company’s staff-wide Value Creation Plan so that it begins funding at a lower price of 100p a share were approved with 11.09% of votes against. The annual remuneration report was backed with 97.35% of votes in favour.
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How does the Value Creation Plan work? In December 2022, awards representing 10% of the plan value were allocated to each of the two executive directors, with the remaining 80% for current and future employees. It will fund at 5.5% of the market value created above the new share price threshold of 100p, compared with 10% under the company’s previous plans. There is a cap on the aggregate payments to any individual of £20 million. Roberts has committed to give any shares received under the scheme to charity.
What’s the view of voting agencies? Glass Lewis remains concerned that the Value Creation Plan offers the potential for “extremely large payouts” based solely on shareholder value creation, which can be driven by market forces rather than company or management performance. It adds: “We generally prefer that incentive awards reflect underlying performance measures that correlate to long-term growth, with appropriate individual limits and award levels.” However, it notes the level of shareholder support at the previous AGM and that the plan extends to below-board employees. As a result, the agency recommends support for the annual remuneration report.
How’s the company doing on diversity? The board has two female directors accounting for 25% of roles and no ethnic diversity. The company supports the Hampton-Alexander and Parker reviews and is committed to increasing female and ethnic representation on its board.
When: 10.30am, Tuesday 26 September.
Where: Bryan Cave Leighton Paisner, 5 Laurence Pountney Hill, London, EC4R 0BR.
How to participate: Proxy voting instructions should be returned no later than 10.30am, Friday 22 September. More AGM details can be found here.
Who’s in the chair? Avril Palmer-Baunuck was appointed to the board in August 2019 and is executive chair of the WeBuyAnyCar and Cinch business Constellation Automotive Group.
How did the company do in the year to 30 April? The van rental and automotive services business, which was created from a merger in February 2020, grew revenues by 20% to £1.5 billion and pre-tax profits by 34.7% to £178.7 million. At an underlying level, profits were 9.7% higher at £165.9 million and earnings per share up 9.5% to 55.6p. A dividend of 16.5p is due to be paid on 29 September, leaving the total for the year by 3p to 24p.
How have shares performed? Down 6% at 376p (332.5p on Thursday).
How much is the boss paid? Martin Ward’s salary has increased 3% this year to £627,628. His total remuneration for 2022/23 amounted to £4.4 million, including the maximum £762,000 under the annual bonus scheme after targets were met based 75% on group pre-tax profits and the rest on strategic objectives. The 100% vesting of long-term incentive shares contributed £3 million to the final figure. Since August 2020 when the award was made, Redde Northgate said it achieved total shareholder return growth of 127% compared with 18% across the FTSE 250 index as a whole. It added that the maximum targets under the scheme for both pre-tax profit and earnings per share were significantly exceeded, with growth of about 180% and 80% respectively over the performance period.
What’s in the new remuneration policy? The previous policy was approved in 2020 with 41.02% of votes against, resulting in the company deciding not to implement its proposed Value Creation Plan. This no longer features in the new policy, which is largely unchanged.
How did last year’s AGM go? The annual remuneration report was approved with 98.85% of votes in favour.
What’s the view of voting agencies? Glass Lewis questions the decision not to exercise discretion to adjust long-term incentive awards, which were granted in August 2020 when shares stood at 186p during a year of stock market volatility. Its concerns are heightened by the exceptional limit of 250% of base salary being used versus a normal grant level of 150%, a decision that it said contributed to significant dissent at the 2020 AGM. The agency recommends shareholders vote against this year’s annual remuneration report.
What’s the company say? It notes the grant level of shares was significantly higher than 2020’s low point of 112p and that over-delivery of merger benefits and significant growth since February 2020 are the primary factors in the valuation growth. “The committee believes the overall quantum for executive directors is appropriately positioned and vesting does not produce excessive outcomes particularly in the context of the value created for shareholders.”
How’s the company doing on diversity? As at 30 April, the board included one director from an ethnic minority background and the representation of women was 37.5%.
When: 10.30am, Thursday 28 September.
Where: Grosvenor House Hotel, Park Lane, London W1K 7TN.
How to participate: Questions in advance of the Babcock International Group (LSE:BAB) meeting should be submitted to email@example.com. Proxy voting has a deadline of 10.30am on Tuesday 26 September. More AGM details can be found here.
Who’s in the chair? Ruth Cairnie, whose engineering career spanned four decades at the oil giant Shell, was appointed in July 2019. She is also a non-executive director at BT Group and Associated British Foods.
How did the company do in the year to 31 March? Revenues rose 8% to £4.44 billion but a stronger operating performance was offset by a £100.1 million loss on Babcock’s Type 31 contract to deliver five Royal Navy frigates and a £117.7 million hit on disposals. Earnings per share reduced to 17.7p from 30.7p, improving to 33.8p when excluding Type 31. The company intends to reintroduce dividend payments by next year, having strengthened the balance sheet and become “a higher-quality, lower-risk and more predictable business”.
How have shares performed? Down 9% at 298.8p (393.4p on Thursday).
How much is the boss paid? David Lockwood’s salary is unchanged at £816,000 pending a review later in the financial year. His total remuneration for 2022/23 amounted to £2.37 million, including £722,000 of cash and deferred shares after the annual bonus scheme paid 59% of the maximum opportunity. This was driven by Babcock’s above-target performance on operating cash flow, whereas an underlying profit of £128.9 million was short of the £223.3 million threshold. The free cash flow component meant the 50% vesting of long-term incentives granted in 2020, contributing £631,000 to the final remuneration figure.
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What’s in the new remuneration policy? The company believes the policy last approved in 2020 with 99.5% of votes in favour remains effective. Having looked at the design of the long-term Performance Share Plan, it is dropping relative total shareholder return as a benchmark in favour of financial metrics more closely tied to the quality of decision-making. It intends for the scheme to be measured 30% against free cash flow, 30% underlying operating margin, 25% organic revenue growth and 15% environmental and sustainability targets. The maximum grant of shares will increase for the chief executive from 200% to 250% of salary, with the maximum annual bonus opportunity at 150% of salary — 40% of which is deferred into shares for three years.
How did last year’s AGM go? The annual remuneration report was approved with 94.45% of votes in favour.
How’s the company doing on diversity? The company does not meet the targets of one board member from a minority ethnic background or 40% of directors being women. At the end of March, 37.5% of the board were women but the appointment of Sir Kevin Smith has since reduced this to 33.3%. Babcock said the board is still “developing and strengthening”, meaning uneven progress towards meeting its policy requirements. It added: “The nomination committee is aware of the challenge that it has to meet its policy and is actively undertaking searches to ensure that the board meets its policy in full.”
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