Why a 150% bonus is not enough for this FTSE 250 chief

This CEO is well-paid but a long-term incentive scheme is no longer generous enough, argues the remuneration committee chair. Graeme Evans explains why.

An improved £1.5 million is to be offered to Bellway (LSE:BWY) boss Jason Honeyman as the builder seeks to fill an “unhealthy” gap between its incentives and those offered to rivals.

The FTSE 250-listed firm is implementing an increase in the upper limit on its long-term incentive scheme to 200% of Honeyman’s £740,000 salary, having been at 150% since 2018.

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The head of the remuneration committee told shareholders ahead of the Newcastle-based company’s AGM, that Bellway does not “slavishly” follow market trends on executive pay but that the gap in the total incentive opportunity had now grown by too much.

Bellway

When: 8.30am, Friday 16 December.

Where: Woolsington House, Woolsington, Newcastle-upon-Tyne, NE13 8BF.

How to participate: Proxy voting instructions need to be returned no later than 8.30am, Wednesday 14 December. More AGM details can be found here.

Who’s in the chair? John Tutte, who previously held senior roles at Redrow, is hosting his first AGM since his appointment in April.

How did the company do in the year to 31 July? Revenues rose by 13.3% to a record £3.54 billion after the number of completions rose by 10.5% to 11,198 homes. Further improvement in operating margin to 18.5% helped underlying profits up by 22.5% to £650.4 million. A final dividend of 95p a share is due to be paid on 11 January and has resulted in a total for the year of 140p, an increase of 19.1% on the year before and three times covered by earnings.

How have shares performed? Down 27% to 2,446p (1,946.5p on Thursday).

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How much is the boss paid? Jason Honeyman’s salary for 2022/23 has increased by 4% to £739,490. He received total remuneration of £1.74 million for 2021/22, which included an annual bonus award close to the maximum opportunity at £841,312. Long-term incentives awarded in November 2019 did not vest. However, the upper limit for grants from this year will increase from 150% to 200% of salary, in line with a change approved at last year’s AGM.

Why is the company changing the limit? The company said its total incentive opportunity lags the housebuilding and UK listed market generally. Remuneration committee chair Jill Caseberry said: “We last increased the annual grant level from 130% to 150% of salary in 2017/18, and whilst the committee does not adjust remuneration packages at board level to slavishly follow the market, we feel now that the gap in incentive opportunity is unhealthy.” She added that pay-out targets are now more challenging than those set previously.

How did last year’s AGM go? The annual remuneration report got 98.37% of votes in favour, while the binding vote on the new three-year remuneration policy received 96.95%.

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 gender split on the board is 43% female. Bellway added: “The board recognises that increased ethnic diversity is necessary and continues to actively work towards this.”

Volution

When: 12 noon, Wednesday 14 December.

Where: Norton Rose Fulbright, 3 More London Riverside, London SE1 2AQ.

How to participate: Questions can be submitted in advance of the meeting to ir@volutiongroupplc.com. Proxy voting instructions need to be returned no later than 12 noon, Monday 12 December. More AGM details can be found here.

Who’s in the chair? Paul Hollingworth joined the board when it listed on the stock market in 2014 and took on his current role in February 2020. He has previously served on the boards of UK listed public companies including De La Rue, Mondi and Thomas Cook.

How did the company do in the year to 31 July? Revenues rose 12.9% to £307.7 million as the designer and maker of energy efficient indoor air quality products achieved growth in its three regions covering the UK, continental Europe and Australasia through both volume and price. An improved margin of 21.1% resulted in profits and earnings per share growth of more than 14% on an adjusted basis to £60.9 million and 24p respectively. A final dividend of 5p a share will be paid on 20 December and results in a total of 7.3p, up 15.9% on the previous year and covered 3.3 times by adjusted earnings.

How have shares performed? Down 13% to 416.5p (355p on Thursday).

How much is the boss paid? Ronnie George has been awarded a 7.5% pay rise for 2022/23, but at £472,608 Volution said his salary is still in the lower quartile of the FTSE 250. Performance metrics of operating profit, adjusted earnings per share (EPS) and working capital management resulted in an annual bonus for 2021/22 of £363,000, equivalent to 66% of the maximum. EPS growth and a total shareholder return of about 120% meant long-term incentive shares from 2019 vested at 100% of the maximum and took George’s total remuneration to £2.2 million.

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What’s the view of voting agencies? Glass Lewis finds the 7.5% pay rises for George and chief financial officer Andy O’Brien to be reasonable, given that they reflect the increased scope and complexity of the business, including a promotion to the FTSE 250 index. It recommends shareholders vote in favour of the annual remuneration report.

How did last year’s AGM go? The annual remuneration report was backed with 97.80% of votes in favour.

How’s the company doing on diversity? The board is over 40% female and also meets the requirements of the Parker Review on ethnic diversity.