Interactive Investor

Your vote counts: is this exec worth a £90,000 pay rise?

11th February 2022 09:04

Graeme Evans from interactive investor

Almost a year in the job and this finance chief’s starting salary is still upsetting shareholders. Find out what all the fuss is about and why investors at this AIM company are upset.

A £90,000 increase in starting salary for the new Virgin Money (LSE:VMUK) finance director means the lender faces a potential protest vote at its AGM next week.

Former ABN Amro director Clifford Abrahams joined the Virgin Money board last March on a salary of £600,000. This compares with the £510,000 paid to his predecessor Ian Smith, who was in the role for five years until his departure in 2020.

Voting advisory group Glass Lewis is unhappy at the scale of the jump and has recommended shareholders vote against the remuneration report.

Shareholders have already staged protests at several FTSE 250 companies this year, with Upper Crust food business SSP Group (LSE:SSPG) the latest to see more than 20% of votes go against its remuneration report.

Virgin Money

When: 9am, Thursday 17 February

Where: Addleshaw Goddard LLP, Milton Gate, 60 Chiswell Street, London EC1Y 4AG.

How to participate: Due to Covid-19, the board recommends that shareholders view the proceedings via live webcast. However, this service does not allow shareholders to participate in the AGM electronically. It requested questions in advance of the meeting, but none were received by the deadline of 3 February. Proxy voting forms are required by 9am on Tuesday. More details on the AGM can be found here.

Who's in the chair? David Bennett, the former Alliance & Leicester boss who joined the board in 2015 and became chairman in May 2020.

How did the company do in the year to 30 September? The bank returned to the black with an underlying profit of £801 million, driven by a recovery in income, lower costs and improved impairment performance. The net interest margin improved to 1.62% from 1.56% in 2020.

How did its shares perform? Up 175% to 204.4p (218.3p on Wednesday).

How much is the boss paid? David Duffy's salary remains at £1.02 million, unchanged for the past two financial years. He received an annual bonus of £140,000, which is based on 12% of the maximum opportunity. The formulaic scorecard outcome for the year was exceeded and should have paid 67%, but was reduced after the target on operating costs was missed. Long-term incentive awards granted in 2018 vested at 60% of their total, taking Duffy's overall remuneration to £2.75 million.

What's the view of voting agencies? Glass Lewis is concerned that chief financial officer Clifford Abrahams was appointed on a salary of £600,000, about 17.6% higher than his predecessor. Whilst recognising that Abrahams has relevant experience in his previous role at ABN Amro, it said the company had failed to provide a “thorough and convincing” explanation for the hike. Believing that increases of this scale should be phased over a number of years, the proxy voting advisory group recommends shareholders go against the remuneration report.

How did last year's AGM go? The remuneration report received 98.65% of votes in favour.

How is the company doing on diversity? It meets the targets set by the Hampton-Alexander review and the Parker review in terms of board diversity.

Gooch & Housego

When: 11am, Wednesday 23 February.

Where: Company head office, Dowlish Ford, Ilminster, Somerset TA19 0PF.

How to participate: Gooch & Housego (LSE:GHH) shareholders can vote online at More details on the AGM can be found on page 129 of the annual report.

Who's in the chair? Gary Bullard, who was appointed in February 2018, has previously held sales and marketing roles at IBM and BT Group.

How did the company do in the year to 30 September? Revenues rose 1.6% to 124.1 million as the maker of optical components benefited from a recovery in the industrial and medical laser markets and a robust performance from telecoms and medical diagnostics. A restructuring programme benefited margins as adjusted earnings per share rose 34.4% to 41p. The company intends to pay a final dividend of 7.7p a share on 25 February, giving a total of 12.2p.

How have shares performed? Up 27.5p to 1,260p (1,095p on Wednesday).

How much is the boss paid? Mark Webster received total remuneration of £679,000, which includes a basic salary of £353,000 and performance related bonus of £312,000.

What happened at last year's AGM? Some 38% of shareholder votes were against the resolution on the annual remuneration report. The company said this was due to a one-time long-term incentive award issued in early 2021 aimed at ensuring retention and incentivisation of senior management during the restructuring of manufacturing operations. The awards were granted at 80% of the CEO's base salary, in addition to normal grants at 120%.

What's the view of voting agencies? As an AIM-listed company, Gooch & Housego is not obliged to hold an advisory vote on its remuneration report. Glass Lewis said it recognised that incentive plans may sometimes need to be altered in order to retain top talent, but questioned the appropriateness of granting additional incentives when financial performance has suffered. However, in light of the company's resumption of dividend payments and the one-off nature of the award it does not believe the issue warrants further action from shareholders.

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