Your vote counts: anger as these mid-caps pay whopping bonuses

10th June 2022 11:23

There are plenty of AGMs coming up for investors to monitor, and some of them have the potential to cause fireworks.

An “excessive and unwarranted” level of bonus payments for the boss of Pendragon (LSE:PDG) has caused controversy ahead of the car retail company’s AGM later this month.

Pendragon’s largest shareholder, Sweden’s Hedin Group, believes that the improved profitability driving chief executive Bill Berman’s £3.4 million total pay and bonus package was far from unique given the abnormal trading conditions caused by supply shortages.

Voting advisory group Glass Lewis shares Hedin’s concern and has recommended shareholders go against the company’s annual remuneration report and the re-election of Pendragon’s pay committee chair.

The agency is also unhappy with John Wood Group (LSE:WG.) over a bonus for chief executive Robin Watson, which it says is out of keeping with the wider shareholder experience.

The AGMs of DIY retailer Kingfisher (LSE:KGF) and gaming firm Entain (LSE:ENT) are less likely to cause controversy, even though the Ladbrokes owner has just handed its boss Jette Nygaard-Andersen a 9.3% pay rise to £820,000. It said the increase was justified by her contribution over the past year and the competitive marketplace for senior talent.

Kingfisher

When: 2pm, Wednesday 22 June.

Where: Storey Club, 4 Kingdom Street, Paddington, London W2 6BD.

How to participate: Questions in advance of the meeting should be submitted to shareholder.enquiries@kingfisher.com by 10pm on Monday, 20 June. They can also be asked during the meeting via the Lumi AGM platform. Proxy voting forms need to be returned no later than 2pm on 20 June. More AGM details can be found here.

Who’s in the chair? Andrew Cosslett, the former InterContinental Hotels boss who has been in the role since June 2017.

How did the company do in the year to 31 January? Its results were the best in the company’s 40-year history as revenues rose 6.8% to £13.2 billion, including an “outstanding” year for B&Q as its sales passed £4 billion. Group pre-tax profits topped £1 billion after a 33% rise, with earnings per share up 43.4% to 40.3p. A final dividend of 8.60p is due for payment on 27 June, forming part of a 50% increase in the total award for the year to 12.40p.

How have shares performed? Up 19.2% to 331.1p (246.7p on Thursday).

How much is the boss paid? A 3% increase has taken the current salary of chief executive Thierry Garnier to £840,500. For 2021/22, he received an annual bonus worth £634,400 as executive directors achieved 97% of the maximum opportunity. Shares awarded in 2019 are due to vest this year with a value of just over £1 million, bringing Garnier’s total remuneration for the financial year to £2.6 million.

What’s in the new remuneration policy? The annual bonus opportunity for the chief executive is increased from 80% to 200% of salary, with anything over 100% of salary deferred into shares for three years. The bonus will be at least 70% based on financial measures and the remainder based on strategic targets. An incentive plan granted every three years with a maximum opportunity of 880% is being replaced with a Performance Share Plan granted annually with an opportunity of up to 275% of salary for the chief executive.

What’s the view of voting agencies? Glass Lewis recommends shareholders support the binding vote on the new remuneration policy and the advisory vote on the directors’ remuneration report.

How did last year’s AGM go? The annual report on remuneration was backed with 92.74% of votes in favour.

How’s the company doing on diversity? The eight-strong board is 50% female and includes one director of colour.

Entain

When: 10am, Friday 24 June.

Where: The Brewery, 52 Chiswell Street, London EC1Y 4SA.

How to participate: Proxy voting forms need to be returned by 10am, 22 June. More AGM details can be found here.

Who’s in the chair? Barry Gibson, the former Littlewods boss and William Hill non-executive director, took on the role in February 2020.

How did the company do in 2021? Revenues of £3.8 billion were 8% higher as underlying earnings rose 5% to £881.7 million at the upper end of previous guidance. The company reported strong growth from its US joint venture BetMGM and said its core retail business had continued its recovery. There is no dividend but the company repaid £44 million from the government’s furlough scheme during the year.

How have shares performed? Up 48.5% to 1,683p (1,450p on Thursday).

How much is the boss paid? The salary of Jette Nygaard-Andersen was increased in January by 9.3% to £820,000. This is much higher than the £675,000 paid to predecessor Shay Segev but on a par with long-time boss Kenny Alexander. Entain’s pay committee said it reflected her contribution since taking on the role in early 2021 and the competitive market for senior talent. Nygaard-Andersen’s single figure remuneration for last year came to £2.5 million, which included the maximum annual bonus of £1.7 million based on meeting targets on operating profit, online gaming growth and safer betting.

How did last year’s AGM go? The annual remuneration report was backed with 98.6% of votes in favour.

What’s the view of voting agencies? Glass Lewis does not believe the salary increase for Nygaard-Andersen warrants shareholder action and has recommended support for the annual remuneration report.

How is the company doing on diversity? The proportion of women on the 11-strong board stood at 36% at the end of 2021. The company does not meet the recommendations of the Parker Review on an ethnically diverse composition.

Pendragon

When: 10.30am, Tuesday 21 June.

Where: CarStore Chesterfield, Unit 2, Eastside Park, Chesterfield, S41 9BU.

How to participate: Questions prior to the meeting should be submitted to AGM2022@pendragon.uk.com. Proxy votes must be received by no later than 10.30am on 17 June. More AGM details can be found here.

Who’s in the chair? Ian Filby, who joined Pendragon in November following a 40 year career in retail, most of which was spent with Alliance Boots.

How did the company do in 2021? Revenues rose 27% on a like-for-like basis as favourable trading conditions due to a surge in used car prices helped the forecourt business deliver a record underlying profit of £83 million, compared with £8.2 million the year before. Basic earnings per share improved to 4.4p but there was no dividend payment.

How have shares performed? Up 77% to 23.2p (23.6p on Thursday).

How much is the boss paid? Chief executive Bill Berman’s salary is unchanged at £550,000 for 2022. For 2021, he received an annual bonus of £825,000 after the remuneration committee awarded the maximum amount at 150% of basic salary. The exceptional trading conditions meant long term incentive awards for October 2020 and July 2021 used a performance period of just one year, rather than three. Based on 91.6% of the maximum opportunity they will vest in 2023 and 2024 respectively, bringing Berman’s single remuneration for the year to £3.4 million.

What’s the view of the company’s biggest shareholder? Sweden’s Hedin Group, which has a 27.1% stake, will be voting against the directors’ remuneration report and the reappointment of remuneration committee chair Mike Wright. It called Berman’s pay “both excessive and unwarranted”. Hedin added: “Pendragon has received Government support over the last two years and its improvement in profitability has been far from unique, as the sector has experienced abnormal levels of profitability due to supply shortages.”

How did last year’s AGM go? Hedin opposed Pendragon’s pay report and Wright’s reappointment as more than 40% of votes went against the company on both resolutions. Hedin said last month: “The board of Pendragon has to stop ignoring the concerns of shareholders and establish a remuneration policy that is appropriate and rewards genuine executive success.”

What’s the Pendragon view? The company intends to revert to long-term awards based on the traditional three-year performance period and two-year holding period. Wright added in the annual report: “It firmly remains the committee’s view that our policy was a key driver in the company’s continued success.”

What’s the view of voting agencies? Glass Lewis recommends voting against the remuneration report and re-election of Wright. It is unhappy with the decision to grant long-term incentives subject to a six-month performance period and no holding period, despite dissent at the 2020 and 2021 AGMs. It also highlights the payment of substantial cash bonus awards to executives given the receipt of government furlough support during the year.

How’s the company doing on diversity? The company’s eight-strong board has one female director, unchanged from the previous year.

John Wood Group

When: 2pm, Wednesday 22 June.

Where: Sir Ian Wood House, Hareness Road, Altens, Aberdeen, AB12 3LE.

How to participate: Shareholders may submit questions in advance of the AGM via the company’s website. Voting instructions must be received not less than 48 hours before the meeting, More AGM details can be found here.

Who’s in the chair? Roy Franklin, who spent 18 years at BP, has been in the role since September 2019.

How did the company do in 2021? Revenues of $6.4 billion (£5.1 billion) were 14% lower on a like-for-like basis, with growth in consulting and operations more than offset by a significant decline in projects. Adjusted earnings fell 10% to $554 million (£440.1 million) and the company recorded a loss of $136 million (£108 million) and loss per share of 20.6 cents (16.37p). It did not pay a dividend for the second year in a row.

How have shares performed? Down 38.4% to 191.1p (229.6p on Thursday).

How much is the boss paid? Robin Watson, who recently announced his intention to step down after seven years as chief executive, has seen his base salary for 2022 increase by 2.5% to £806,880. His single figure remuneration for 2021 came to £1.26 million. This included an annual bonus of £207,000, which the remuneration committee reduced from £494,184 to reflect Wood’s financial performance, continued suspension of dividend and overall business context. Watson’s total figure also included £134,000 from a long-term incentive scheme after the committee determined that 25% of the maximum was appropriate.

What’s the view of voting agencies? Glass Lewis recommends that shareholders vote against the remuneration report. While it welcomed the move to reduce bonuses, it said it was still inappropriate for executives to receive awards given the overall stakeholder experience. It noted the continued government assistance during the year and that shares had yet to recover to pre-pandemic levels.

How did last year’s AGM go? The annual remuneration report was backed with 97.74% of votes in favour.

How’s the company doing on diversity? During 2021 the number of female board members was at least one-third and at 31 December was 40%. The board currently has no ethnic minority representation.

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