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Key questions at Informa

Investors are divided on whether its non-executive directors made the right pay decisions – what do you think?
Key questions at Informa

Until early 2020, almost two thirds of the revenues of Informa (INF) came from organising events. But then of course, Covid-19 flared up across the globe, and it had to adapt.

In March 2020, Informa’s three event divisions thought they need cancel only 13 events. They said they were rescheduling 45 large events and 70 smaller ones for later in 2020.

By September, lockdowns and travel restrictions in its largest market (North America) and in Europe had pushed in-person events back to the second quarter of 2021. The focus was now on preserving cash, maintaining digital product development and protecting its 11,000 people.

In April 2021, the Group reported a £1.14bn pre-tax loss and announced a renewed focus on subscription and B2B digital services. Fifty six in-person events had been held in China and Japan so far in 2021, and others were expected to start up gradually elsewhere. It raised £1bn by issuing 20 per cent more shares.

As the year unfolded, the pre-Covid strategy and pay policy had become increasingly irrelevant. Below are the three key issues that non-executive directors had to address.

 

Q1: Was a change in assessing performance justified?

2020 became all about stabilising the Group and making it secure for the future. Pre-Covid performance targets were no longer valid, so for the annual bonus, the committee announced new ones – and then said it would assess these in July (this month). That left a blank in the 2020 annual report. For the maturing 2018 share plan, both performance conditions failed – the halving of the share price in March 2020 nullified the TSR condition and the growth in earnings per share in 2018 and 2019 was wiped out by the loss in 2020. A zero payout, then. But during 2020, the strategy had had to switch from growth to damage limitation. Executives had been required to cut costs and generate cash and the committee chose to judge them on that. They paid the executives over a third of the shares originally awarded.

 

Q2: Is Lord Carter’s pay too high?

Those shares were worth £0.4m to Stephen Carter, Informa’s chief executive. They bumped up the amount he received for 2020 to £1.5m, with his 2020 bonus still to come. That took the total received since he took on the role seven years ago to over £20m. His £4bn purchase of UBM in 2018 skewed Informa’s exposure towards the large events business, and since 2014, Informa has doubled the number of shares in issue and grown in market value from £3bn to £8bn. 

 

Q3: How much are performance conditions worth?

The Group now needs pay to focus on rebuilding growth from the low base forced on it in 2020, but with continuing uncertainty, how can realistic performance targets be set for the next three years? The remuneration committee chose to scrap them. They came up with the grandly titled “2021-2023 Equity Revitalisation Plan” (ERP). Senior executives prefer this. Their salaries and benefits stay the same, but now the risk has been taken out of their share awards – the shares will no longer depend on their performance. How much is it worth to them to replace uncertainty with certainty?

 

The answer

The answers to each of these questions is subjective. On the last one, the committee decided that one restricted share was worth two with performance conditions. Thirty large shareholders were consulted, who together owned 70 per cent of the Group, and Stephen Davidson, who chairs the remuneration committee, said that there was “strong support for the overall rationale of the ERP”. At a general meeting last December, the new policy got through, but only after a 41 per cent vote against it. The new awards were duly made in January 2021.

 

The verdict

So had the remuneration committee managed pay correctly? Some didn’t think so. Proxy advisers criticised the committee for changing targets in mid-stream. “The decision to intervene in order to salvage an underwater award is a significant deviation from best practice, even in the context of the health pandemic,” ISS said. The new pay policy still rankled. Mr Davidson had acknowledged that “there were many different and sometimes conflicting views” and Glass Lewis objected to his “insufficient response” to the large shareholder dissent. Legal and General Investment Management, the UK’s largest asset manager, was not alone in criticising him for failing to “address persistent concerns”.

At the AGM in early June, the vote against the remuneration report was 62 per cent. This was advisory – a similar vote in December would have scuppered the new policy. Mr Davidson narrowly escaped being voted out of office: 47 per cent of the votes were against him. And about a fifth of the votes were cast against the two other members of the committee who stood for re-election.