Annual general meeting (AGM) season is nearing an end, but there is still time for more bust-ups about executive pay. Shareholders at International Distributions Services (IDS), United Utilities (UU.), Pennon (PNN) and FirstGroup (FGP) will gather later this week to vote on remuneration packages, against a backdrop of strikes and struggling public services.
After months of industrial action, IDS – the parent company of Royal Mail – has struck a deal with posties over changes to salaries and working conditions. Nevertheless, management pay is likely to be under scrutiny on Thursday. The group does not intend to pay outgoing chief executive Simon Thompson a bonus for 2023, but chief financial officer Mick Jeavons is in line for an extra £251,000 given the “strong progress” at European courier GLS. This would take his total remuneration to £936,000, including a long-term bonus and salary.
The courier also intends to change its bonus criteria for 2023-24. The current policy requires a minimum level of earnings, but the remuneration committee said “there may be other measures that better represent successful performance during different stages of growth or turnaround of our businesses”.
“It is therefore proposed that this provision is changed to allow the committee to select from a broader range of financial or non-financial measures as underpins across the group and/or an appropriate business unit.” These will vary between executives, but will include the cash profits of European delivery business GLS, Royal Mail operating profits and "strategic priorities" such as "maintaining group liquidity", in the case of Jeavons.
Thompson, who resigned in May, will be eligible for a 2023-24 bonus under the proposed plan, adjusted to reflect his active service.
Water company pay packets are also under the spotlight. Pennon, which owns South West Water, will hold its AGM on Thursday, but chief executive Susan Davy has already waived her annual bonus given the “exceptional economic backdrop”. She has also declined 2020 long-term incentive plan awards, meaning her total pay has dropped from £1.53mn in 2022 to £543,000 in 2023. A new incentive plan being voted on at the AGM won't include increases, the company said.
South West Water is being investigated by water regulator Ofwat over the accuracy of information it provides on leakage and water consumption.
Pennon’s cautious approach has been echoed elsewhere. Executive directors at shoe retailer Dr Martens (DOCS), for example, waived their entitlement to bonuses in 2023, “considering the wider disappointing business financial performance”. After missing most of the incentive scheme targets, just 9 per cent of the maximum bonus level would have been paid.
Management at United Utilities, however – which is based in the north-west of England and is one of the UK’s most polluting water companies – is ploughing on with corporate payouts. “The committee was satisfied that the measures and targets set were robust and stretching and that the overall payout was appropriate,” the group concluded. The executive directors waived the environmental elements of their bonuses, however, despite hitting the stretch target for the "Better Rivers" scheme. This meant reducing "storm overflow activations" by 39 per cent since 2020.
As such, outgoing chief executive Steve Mogford, who retired in March, is in line to receive £2.28mn this year, including a £426,000 bonus and £886,000 from long-term incentives.
As strikes reignite on the railways, transport operator FirstGroup has also awarded its chief executive and chief financial officer bonuses of £682,900 and £650,400 respectively through annual cash bonuses and deferred shares. chief financial officer Ryan Mangold also took home £1.9mn in long-term bonuses, largely driven by the company's share price increase in the past three years, in which time FirstGroup has rebounded from an all-time low triggered by the initial months of the pandemic. Shareholders will vote on the remuneration report on Friday.
After a quiet 2022, it has been a relatively tumultuous AGM season so far.
Almost a third of Boohoo (BOO) shareholders voted against the retailer’s remuneration report last month, after management concluded the “formulaic outcome under the annual bonus is not an accurate reflection of the strong performance of management during the year”.
Vistry (VTY), Pendragon (PDG) and Pearson (PSON) have also suffered shareholder rebellions. Pendragon's shareholders actually voted down the report on directors' remuneration at last month's AGM. The new policy scraped through with 58 per cent support, however. "The remuneration committee is satisfied its decisions were made in the best interests of all stakeholders," the company said in response to the defeat.
