Your vote counts: who’s getting this £16m shares windfall?
4th March 2022 09:34
by Graeme Evans from interactive investor
A generous incentive scheme at this UK mid-cap is paying out big time. The CEO is doing particularly well, but investors aren't happy.
A £16 million shares windfall for the boss of Safestore Holdings (LSE:SAFE) as part of a controversial five-year long-term incentive scheme is likely to dominate the company’s AGM.
Frederic Vecchioli will be able to exercise the shares from September after a spectacular period of growth in which the company added £1.8 billion of market value and joined the FTSE 250.
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The scheme, which applied to executive directors and 56 colleagues, was heavily criticised after its introduction and voting agency Glass Lewis has recommended shareholders vote against Safestore’s remuneration report at this month’s annual general meeting.
Safestore Holdings
When: 12 noon, Wednesday 16 March
Where: Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT
How to participate: Proxy voting instructions must be received by Link Group no later than 12 noon on Monday, 14 March. More details on the AGM can be found here.
How did the company do in the year to 31 October? The FTSE 250-listed self-storage business delivered a 34% rise in adjusted earnings per share following an “outstanding” performance in the UK, where it has the majority of its outlets. The final dividend for payment on 7 April has been increased by 38.6% to 17.6p a share, leading to an overall rise of 34.9% to 25.1p a share.
How did the shares perform? Up 47% to 1,185p (1,205p on Thursday)
How much is the boss paid? Frederic Vecchioli received a basic salary of £431,000, but his overall remuneration ballooned to more than £17 million as a result of long-term incentives (LTIPs) granted in 2017. His overall figure included an annual bonus of £662,000.
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What’s behind the £15.9 million award? Earnings per share growth, which accounted for two-thirds of the LTIP award, came in ahead of the 12% a year required to achieve the maximum performance - at 15.4% across five years. Over this period the company’s market capitalisation increased by £1.79 billion, with £172.1 million of dividend payments made. The balance of the award will be determined based on relative total shareholder performance in September.
What’s the view of voting agencies? Glass Lewis said: “We deem that payments in the region of £16 million for the CEO are excessive.” It believes the remuneration committee should have gone further in its use of discretion to reduce outcomes following shareholder concerns raised at previous AGMs. Whilst recognising the strong share price performance and the fact that such awards are not part of current remuneration policy, the agency has recommended shareholders oppose the company’s advisory vote on the annual remuneration report.
What has the company said? Safestore said the purpose of the 2017 LTIP scheme was to focus 56 key staff to drive sustainable growth over a five-year period. It said: “The committee believes that the awards earned by the executive directors and their colleagues, which will vest in September 2022, are commensurate with the corporate success of the company.”
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How did last year’s AGM go? The annual remuneration report received 96.6% of votes in favour. At the 2018 AGM, however, discontent over the company’s remuneration policy and long-term incentives led to votes of more than 45% against the annual remuneration report and re-election of remuneration committee chair Claire Balmforth.
How is the company doing on diversity? The company has met the Hampton-Alexander recommendation to have at least 33% of board roles filled by women. It has not disclosed progress on meeting the Parker review target on ethnic diversity.
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