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Executive pay: Shareholder revolts at Weir and Shire- as it happened Executive pay: Shareholder revolts at Weir and Shire- as it happened
(4 months later)
6.07pm BST6.07pm BST
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Angry shareholders, slower US growth and a steel pensions timebombAngry shareholders, slower US growth and a steel pensions timebomb
It’s been a packed day of frustrated shareholders and gloomy economic news.It’s been a packed day of frustrated shareholders and gloomy economic news.
Before we go here’s a summary of the main business stories:Before we go here’s a summary of the main business stories:
Phew! And now it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.Phew! And now it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.
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Following the upset at Weir’s AGM, the engineering company’s chairman, Charles Berry, has issued a statement (which, in a sign they are not letting earlier hopes go, contains quite a lot of “would haves”).Following the upset at Weir’s AGM, the engineering company’s chairman, Charles Berry, has issued a statement (which, in a sign they are not letting earlier hopes go, contains quite a lot of “would haves”).
Here’s an extract from the statement (with my bolding up of some key points):Here’s an extract from the statement (with my bolding up of some key points):
“The Board are pleased that shareholders have endorsed the vast majority of resolutions at today’s Annual General Meeting. The Group’s resolution on the Directors’ Remuneration Policy did not gain sufficient support and will not now proceed. During an extensive consultation period, the Board had tried to forge a consensus between different shareholder views.“The Board are pleased that shareholders have endorsed the vast majority of resolutions at today’s Annual General Meeting. The Group’s resolution on the Directors’ Remuneration Policy did not gain sufficient support and will not now proceed. During an extensive consultation period, the Board had tried to forge a consensus between different shareholder views.
“The Group’s proposed policy would have offered senior management greater stability through the introduction of restricted stock awards in return for a substantial reduction in the maximum award available to the most senior Executive Director from 250% of salary to 165%. Restricted stock awards do not come with direct performance criteria but closely align senior management incentives with shareholder interests, as their value is dependent on share price performance, with the award taking five years to fully vest. In addition, the Remuneration Committee would have had the power to claw back restricted awards if necessary.“The Group’s proposed policy would have offered senior management greater stability through the introduction of restricted stock awards in return for a substantial reduction in the maximum award available to the most senior Executive Director from 250% of salary to 165%. Restricted stock awards do not come with direct performance criteria but closely align senior management incentives with shareholder interests, as their value is dependent on share price performance, with the award taking five years to fully vest. In addition, the Remuneration Committee would have had the power to claw back restricted awards if necessary.
“The policy was designed to ensure fairness and consistency across senior management levels and followed extensive consultation with shareholders, who held a wide range of views. During those discussions there was broad acknowledgement of the issue facing many companies, including Weir, of how to effectively recruit, retain and incentivise senior management, across multiple territories, when market conditions beyond their control remain challenging for a sustained period.“The policy was designed to ensure fairness and consistency across senior management levels and followed extensive consultation with shareholders, who held a wide range of views. During those discussions there was broad acknowledgement of the issue facing many companies, including Weir, of how to effectively recruit, retain and incentivise senior management, across multiple territories, when market conditions beyond their control remain challenging for a sustained period.
“In Weir’s case, these market conditions have recently included a significant fall in commodity prices as a result of oversupply in mining and oil markets and a slowdown in global economic growth. Given the volatility in end markets, the Group’s Remuneration Committee has highlighted the difficulty in setting meaningful financial performance targets over the three-year period required by the current Long Term Incentive Plan.”“In Weir’s case, these market conditions have recently included a significant fall in commodity prices as a result of oversupply in mining and oil markets and a slowdown in global economic growth. Given the volatility in end markets, the Group’s Remuneration Committee has highlighted the difficulty in setting meaningful financial performance targets over the three-year period required by the current Long Term Incentive Plan.”
“While acknowledging the issue faced by the Group, a majority of shareholders were clearly uncomfortable with a new approach which did not follow standard UK practice. However, as the Interim Report by the Investment Association’s Executive Remuneration Working Group recently suggested, standard practice in the UK may not be sufficiently flexible and companies should be allowed ‘to propose the remuneration structure that is in their judgement most appropriate’ including consideration of the introduction of restricted stock.”“While acknowledging the issue faced by the Group, a majority of shareholders were clearly uncomfortable with a new approach which did not follow standard UK practice. However, as the Interim Report by the Investment Association’s Executive Remuneration Working Group recently suggested, standard practice in the UK may not be sufficiently flexible and companies should be allowed ‘to propose the remuneration structure that is in their judgement most appropriate’ including consideration of the introduction of restricted stock.”
UpdatedUpdated
at 5.22pm BSTat 5.22pm BST
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Weir Group voted down on pay policyWeir Group voted down on pay policy
Some late, breaking AGM news now and the shareholder spring is in full flow with a big upset for engineering group Weir.Some late, breaking AGM news now and the shareholder spring is in full flow with a big upset for engineering group Weir.
There was a 72.4% vote against Weir’s remuneration policy.There was a 72.4% vote against Weir’s remuneration policy.
The Glasgow engineer had two votes on pay, and the policy vote was also going to be subject to close scrutiny given it included a share award which was not linked to performance.The Glasgow engineer had two votes on pay, and the policy vote was also going to be subject to close scrutiny given it included a share award which was not linked to performance.
Weir had argued it had used this policy for US directors and said the pay for the chief executive was down last year.Weir had argued it had used this policy for US directors and said the pay for the chief executive was down last year.
Ahead of the vote, Hermes, representing pension funds, had said: “We are recommending to clients that they vote against, due to the proposed award of restricted shares which are not tied to performance targets.”Ahead of the vote, Hermes, representing pension funds, had said: “We are recommending to clients that they vote against, due to the proposed award of restricted shares which are not tied to performance targets.”
So it’s back to the drawing board for Weir.So it’s back to the drawing board for Weir.
And so the shareholder protests continue: Engineering company Weir gets a 72.4% vote against the remuneration policyAnd so the shareholder protests continue: Engineering company Weir gets a 72.4% vote against the remuneration policy
Weir says it will continue to operate under the remuneration policy which was approved by shareholders in 2014Weir says it will continue to operate under the remuneration policy which was approved by shareholders in 2014
UpdatedUpdated
at 4.54pm BSTat 4.54pm BST
4.45pm BST4.45pm BST
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FTSE erases losses to finish marginally up on the dayFTSE erases losses to finish marginally up on the day
On financial markets, London shares have managed to claw back some ground this afternoon and the FTSE 100 erased early losses to finish virtually unchanged on the day.On financial markets, London shares have managed to claw back some ground this afternoon and the FTSE 100 erased early losses to finish virtually unchanged on the day.
The London bluechips index is 2.5 points higher at 6,322.40. It had earlier dropped sharply as markets around the world were dragged lower on disappointment at the Japanese central bank’s decision not to come up with any fresh stimulus measures.The London bluechips index is 2.5 points higher at 6,322.40. It had earlier dropped sharply as markets around the world were dragged lower on disappointment at the Japanese central bank’s decision not to come up with any fresh stimulus measures.
It’s a similar story of little change on the day across European stock markets with France’s CAC40 index down just 0.3% and Germany’s Dax up 0.1%. Spain’s Ibex has fared worse, down 0.8%.It’s a similar story of little change on the day across European stock markets with France’s CAC40 index down just 0.3% and Germany’s Dax up 0.1%. Spain’s Ibex has fared worse, down 0.8%.
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Jill TreanorJill Treanor
Another FTSE 100 company -building materials business CRH - has also had a protest over pay, this time a binding vote over policy.Another FTSE 100 company -building materials business CRH - has also had a protest over pay, this time a binding vote over policy.
Jill Treanor reports that just over 40% of shareholders voted against the new pay policy - which covers the next three years - and which increases the chief executive’s pay potential by 50%.Jill Treanor reports that just over 40% of shareholders voted against the new pay policy - which covers the next three years - and which increases the chief executive’s pay potential by 50%.
CRH, as an Irish incorporate company but listed in London, did not technically have to put its pay policy to a vote.CRH, as an Irish incorporate company but listed in London, did not technically have to put its pay policy to a vote.
Its remuneration report, which covers pay for 2015, had an 8% vote against.Its remuneration report, which covers pay for 2015, had an 8% vote against.
4.13pm BST4.13pm BST
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Julia KolleweJulia Kollewe
Back to AGM showdowns now and my colleague Julia Kollewe has been at the Schroders AGM today, where shareholders registered their frustration with the elevation of former chief executive Michael Dobson, who ran the investment firm for more than 14 years, to chairman.Back to AGM showdowns now and my colleague Julia Kollewe has been at the Schroders AGM today, where shareholders registered their frustration with the elevation of former chief executive Michael Dobson, who ran the investment firm for more than 14 years, to chairman.
Julia reports:Julia reports:
Nearly 15% voted against Dobson’s re-election, and almost 12% voted against Lord Howard of Penrith, the senior independent director who oversaw the move.Nearly 15% voted against Dobson’s re-election, and almost 12% voted against Lord Howard of Penrith, the senior independent director who oversaw the move.
Hermes, which represents pension funds and had urged other investors to oppose Dobson’s promotion, voted against both.Hermes, which represents pension funds and had urged other investors to oppose Dobson’s promotion, voted against both.
It is a sizeable protest vote, given that the Schroders family owns 48% of the shares. Some 4% of investors voted against the firm’s remuneration report.It is a sizeable protest vote, given that the Schroders family owns 48% of the shares. Some 4% of investors voted against the firm’s remuneration report.
At the meeting in London, Lord Howard said the company was aware that it was breaching corporate governance guidelines by making Dobson chairman, but defended his promotion. “We thought he was such a good and such an obvious candidate,” he said.At the meeting in London, Lord Howard said the company was aware that it was breaching corporate governance guidelines by making Dobson chairman, but defended his promotion. “We thought he was such a good and such an obvious candidate,” he said.
One of the biggest fund managers in the City, Schroders had consulted its 10 largest investors, and “overall we received considerable, a lot of support” although he admitted that there were “some shareholders who had concerns”. Howard said the company would continue to talk to them.One of the biggest fund managers in the City, Schroders had consulted its 10 largest investors, and “overall we received considerable, a lot of support” although he admitted that there were “some shareholders who had concerns”. Howard said the company would continue to talk to them.
Royal London Asset Management voted against Schroders’ pay policy and the appointment of Dobson as chair. Its corporate governance manager Ashley Hamilton Claxton said: “Although Mr Dobson was successful in leading the company as CEO, his appointment as chairman is inappropriate and in clear violation of the corporate governance code.”Royal London Asset Management voted against Schroders’ pay policy and the appointment of Dobson as chair. Its corporate governance manager Ashley Hamilton Claxton said: “Although Mr Dobson was successful in leading the company as CEO, his appointment as chairman is inappropriate and in clear violation of the corporate governance code.”
3.57pm BST3.57pm BST
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There have been fresh developments in the BHS story this afternoon.There have been fresh developments in the BHS story this afternoon.
Following the retailer’s collapse into administration on Monday, Sir Philip Green and Dominic Chappell face being hauled in front of MPs to explain their management of the company after an influential parliamentary committee launched an inquiry into the department store chain.Following the retailer’s collapse into administration on Monday, Sir Philip Green and Dominic Chappell face being hauled in front of MPs to explain their management of the company after an influential parliamentary committee launched an inquiry into the department store chain.
We've launched our inquiry looking into the sale and acquisition of #BHS. Find out more about the inquiry: https://t.co/g54k9Lp4ACWe've launched our inquiry looking into the sale and acquisition of #BHS. Find out more about the inquiry: https://t.co/g54k9Lp4AC
Graham Ruddick reports:Graham Ruddick reports:
The Commons Business, Innovation and Skills (BIS) select committee has announced it will explore the sale and acquisition of BHS, including whether the directors of Green’s Arcadia and Retail Acquisitions acted as best they could to fulfil their statutory duties.The Commons Business, Innovation and Skills (BIS) select committee has announced it will explore the sale and acquisition of BHS, including whether the directors of Green’s Arcadia and Retail Acquisitions acted as best they could to fulfil their statutory duties.
BHS called in administrators on Monday, putting almost 11,000 jobs at risk. The retailer was owned by Green for 15 years until he sold it for £1 last March to Retail Acquisitions, a consortium of little-known accountants and lawyers led by Chappell.BHS called in administrators on Monday, putting almost 11,000 jobs at risk. The retailer was owned by Green for 15 years until he sold it for £1 last March to Retail Acquisitions, a consortium of little-known accountants and lawyers led by Chappell.
BHS’s collapse has caused controversy because it has been saddled with a £571m pension deficit despite Green collecting more than £580m in dividends, rent and interest payments during his ownership, with Retail Acquisitions receiving payments of more than £25m from BHS over the last 13 months.BHS’s collapse has caused controversy because it has been saddled with a £571m pension deficit despite Green collecting more than £580m in dividends, rent and interest payments during his ownership, with Retail Acquisitions receiving payments of more than £25m from BHS over the last 13 months.
The full story:The full story:
Related: BHS collapse: Sir Philip Green may face grilling by MPs
3.42pm BST3.42pm BST
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Minions married up with Shrek in DreamWorks dealMinions married up with Shrek in DreamWorks deal
In US company news, Disney will have to size up to a formidable rival after confirmation from Comcast’s NBCUniversal that it has lined up a $3.8bn deal to buy DreamWorks Animation, maker of hits from Shrek to Kung Fu Panda.In US company news, Disney will have to size up to a formidable rival after confirmation from Comcast’s NBCUniversal that it has lined up a $3.8bn deal to buy DreamWorks Animation, maker of hits from Shrek to Kung Fu Panda.
The deal will see DreamWorks Animation come under the same roof as NBCUniversal-owned Illumination Entertainment, maker of the hugely profitable Despicable Me films and spin-off Minions.The deal will see DreamWorks Animation come under the same roof as NBCUniversal-owned Illumination Entertainment, maker of the hugely profitable Despicable Me films and spin-off Minions.
The deal, a healthy premium on DreamWorks Animation’s $2.3bn stock market valuation, is expected to close by the end of the year subject to clearance by competition regulators, reports Mark Sweney.The deal, a healthy premium on DreamWorks Animation’s $2.3bn stock market valuation, is expected to close by the end of the year subject to clearance by competition regulators, reports Mark Sweney.
Mark’s full story:Mark’s full story:
Related: Comcast’s NBCUniversal to buy DreamWorks Animation in $3.8bn deal
3.27pm BST3.27pm BST
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Back with the main economic story of the afternoon, the sharp slowdown in US GDP growth in the first quarter, as reported earlier, forms part of a worrying global trend, in the eyes of our economics editor Larry Elliott.Back with the main economic story of the afternoon, the sharp slowdown in US GDP growth in the first quarter, as reported earlier, forms part of a worrying global trend, in the eyes of our economics editor Larry Elliott.
Central bankers around the world are getting diminishing returns on their actions and all the major economies are expanding more weakly than they were in the middle of last year.Central bankers around the world are getting diminishing returns on their actions and all the major economies are expanding more weakly than they were in the middle of last year.
The global economy is running out of steam and the conventional weapons are increasingly ineffective. This is not about blizzards shutting factories in Michigan. It goes much deeper than that,” writes Larry.The global economy is running out of steam and the conventional weapons are increasingly ineffective. This is not about blizzards shutting factories in Michigan. It goes much deeper than that,” writes Larry.
Here’s the full comment:Here’s the full comment:
Related: Sluggish US growth forms part of a worrying global trend
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Sticking with UK news for a moment, Jill Treanor and Julia Kollewe have been following shareholder rebellions over pay today.Sticking with UK news for a moment, Jill Treanor and Julia Kollewe have been following shareholder rebellions over pay today.
They have more details on the majority of investors at Shire pharmaceuticals failing to support a 25% pay rise for its chief executive, Flemming Ørnskov. The report continues:They have more details on the majority of investors at Shire pharmaceuticals failing to support a 25% pay rise for its chief executive, Flemming Ørnskov. The report continues:
The increase in his salary to $1.7m (£1.2m) means Ørnskov’s bonuses are also going up, a move which shareholders had been urged to protest against before the annual meeting on Thursday.The increase in his salary to $1.7m (£1.2m) means Ørnskov’s bonuses are also going up, a move which shareholders had been urged to protest against before the annual meeting on Thursday.
The advisory pay vote squeezed through, as holders of 50.5% of the shares in the Dublin-based but London-listed FTSE 100 company voted in favour – but if deliberate abstentions were included, support for the board fell just below 50%.The advisory pay vote squeezed through, as holders of 50.5% of the shares in the Dublin-based but London-listed FTSE 100 company voted in favour – but if deliberate abstentions were included, support for the board fell just below 50%.
It builds on the defiant mood in which the AGM season started earlier this month when there were “no votes” at two FTSE 100 companies – BP and Smith & Nephew – on the same day. Mining company Anglo American has also faced protests over pay, with more than 40% of investors voting against its remuneration report last week.It builds on the defiant mood in which the AGM season started earlier this month when there were “no votes” at two FTSE 100 companies – BP and Smith & Nephew – on the same day. Mining company Anglo American has also faced protests over pay, with more than 40% of investors voting against its remuneration report last week.
Jill and Julia’s full story is here:Jill and Julia’s full story is here:
Related: Shareholder rebellions gather pace with Shire pay revolt
3.11pm BST3.11pm BST
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Carney cites EU referendum risks as he notes UK slowdownCarney cites EU referendum risks as he notes UK slowdown
Bank of England governor Mark Carney has been in Stockport this week and talking about the EU referendum again.Bank of England governor Mark Carney has been in Stockport this week and talking about the EU referendum again.
Growth appears to be slowing ahead of June’s vote, said Carney, who has previously warned that Britain’s economy could struggle to grow after a decision to quit the European Union. The referendum itself posed a significant risk to the economy, the Canadian said.Growth appears to be slowing ahead of June’s vote, said Carney, who has previously warned that Britain’s economy could struggle to grow after a decision to quit the European Union. The referendum itself posed a significant risk to the economy, the Canadian said.
He told the Stockport Express newspaper: “In the very short term the economy appears to be slowing, probably related to issues around the referendum. One of the responsibilities of the Bank of England is to manage risk and financial stability.He told the Stockport Express newspaper: “In the very short term the economy appears to be slowing, probably related to issues around the referendum. One of the responsibilities of the Bank of England is to manage risk and financial stability.
“Risks around the referendum are the biggest risks facing the UK economy, we have contingency planning to decrease the potential impacts of uncertainty.”“Risks around the referendum are the biggest risks facing the UK economy, we have contingency planning to decrease the potential impacts of uncertainty.”
As we reported yesterday, the latest official figures showed UK economic growth slowed markedly in the first quarter of this year to 0.4% from 0.6% in the final three months of 2015. But economists are divided over how much of the slowdown could be blamed on the referendum.As we reported yesterday, the latest official figures showed UK economic growth slowed markedly in the first quarter of this year to 0.4% from 0.6% in the final three months of 2015. But economists are divided over how much of the slowdown could be blamed on the referendum.
The full interview with Carney, including him fessing up to drinking a whole half pint of beer while on duty (gasp!) is here.The full interview with Carney, including him fessing up to drinking a whole half pint of beer while on duty (gasp!) is here.
#BankofEngland Governer Mark Carney in #Stockport to talk potential #Brexit and beer https://t.co/siGlflCLhC pic.twitter.com/o04nVLW6ky#BankofEngland Governer Mark Carney in #Stockport to talk potential #Brexit and beer https://t.co/siGlflCLhC pic.twitter.com/o04nVLW6ky
2.36pm BST2.36pm BST
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In other UK news... the business select committee has launched a full inquiry into the collapse of high street chain BHS.In other UK news... the business select committee has launched a full inquiry into the collapse of high street chain BHS.
They will investigate the sale of the business by Sir Philip Green for £1 last year, what due diligence was done by the buyers, and whether the taxpayer is now on the hook for BHS’s pension bill.They will investigate the sale of the business by Sir Philip Green for £1 last year, what due diligence was done by the buyers, and whether the taxpayer is now on the hook for BHS’s pension bill.
Iain Wright MP, committee chair, says:Iain Wright MP, committee chair, says:
“The collapse of BHS brings misery and uncertainty for thousands of workers and also places a potentially significant burden on the taxpayer in the form of pension liabilities.“The collapse of BHS brings misery and uncertainty for thousands of workers and also places a potentially significant burden on the taxpayer in the form of pension liabilities.
The sale and acquisition of BHS raises real questions about whether directors acted in the best long-term interests of the company and their employees. Is there too much of an incentive in the system for owners to asset-strip, take out vast sums for personal gain, and then dump and run leaving the taxpayer to pick up the tab when the company fails, rather than create value for the long-term?The sale and acquisition of BHS raises real questions about whether directors acted in the best long-term interests of the company and their employees. Is there too much of an incentive in the system for owners to asset-strip, take out vast sums for personal gain, and then dump and run leaving the taxpayer to pick up the tab when the company fails, rather than create value for the long-term?
2.29pm BST2.29pm BST
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Back in the UK, Royal Bank of Scotland has admitted that it will probably fail to sell its Williams & Glyn division by the end of next year.Back in the UK, Royal Bank of Scotland has admitted that it will probably fail to sell its Williams & Glyn division by the end of next year.
It has just warned that City that it will probably miss a deadline of the end of 2017 to offload more than 300 branches, due to the complexity of separating customers from the rest of RBS.It has just warned that City that it will probably miss a deadline of the end of 2017 to offload more than 300 branches, due to the complexity of separating customers from the rest of RBS.
The overall financial impact on RBS is now likely to be significantly greater than previously estimated, it admits.The overall financial impact on RBS is now likely to be significantly greater than previously estimated, it admits.
RBS shares have been hit hard, down 4.6%.RBS shares have been hit hard, down 4.6%.
2.09pm BST2.09pm BST
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This is the third year running in which US growth has been alarmingly weak in the January-March quarter.This is the third year running in which US growth has been alarmingly weak in the January-March quarter.
US Q1 GDP +0.5%. That's annualized, so economy virtually ground to a halt. GDP trend pretty clear in last two years: pic.twitter.com/xYVAAnHcmpUS Q1 GDP +0.5%. That's annualized, so economy virtually ground to a halt. GDP trend pretty clear in last two years: pic.twitter.com/xYVAAnHcmp
2.05pm BST2.05pm BST
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Weak growth = no June rate hikeWeak growth = no June rate hike
There’s no chance of the US central bank raising interest rates while growth is so weak, argues Tom Floyd of Foenix Partners.There’s no chance of the US central bank raising interest rates while growth is so weak, argues Tom Floyd of Foenix Partners.
According to Floyd, Americans can stop worrying that interest rates might rise in June.According to Floyd, Americans can stop worrying that interest rates might rise in June.
Despite the Fed’s best efforts to leave the door open for a hike at the next meeting, today’s GDP data risks blowing it firmly shut. The data, showing a rise of just 0.5% in the first quarter versus expectations of a rise of 0.7%, undermines the more hawkish Fed tone from last night and does little to justify an imminent raise.Despite the Fed’s best efforts to leave the door open for a hike at the next meeting, today’s GDP data risks blowing it firmly shut. The data, showing a rise of just 0.5% in the first quarter versus expectations of a rise of 0.7%, undermines the more hawkish Fed tone from last night and does little to justify an imminent raise.
Although the Fed dropped language acknowledging global risks it is worth noting the next meeting is only 8 days before the next major global risk event, the Brexit vote.Although the Fed dropped language acknowledging global risks it is worth noting the next meeting is only 8 days before the next major global risk event, the Brexit vote.
In light of the soft data and the looming referendum, a June hike is looking increasingly unlikely with Janet Yellen’s attempts to convince markets to the contrary becoming largely futile. Traders will remain rightly sceptical.In light of the soft data and the looming referendum, a June hike is looking increasingly unlikely with Janet Yellen’s attempts to convince markets to the contrary becoming largely futile. Traders will remain rightly sceptical.