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| More than half of Morrisons investors rebel over executive pay | More than half of Morrisons investors rebel over executive pay |
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| Supermarket appears to blame shareholder lobby group after vote on renumeration report that could increase bonus payouts | |
| Sarah Butler and | |
| Zoe Wood | |
| Fri 16 Jun 2017 09.11 BST | |
| First published on Thu 15 Jun 2017 19.21 BST | |
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| More than half of Morrisons shareholders have failed to back the supermarket’s bosses’ pay package in a massive protest vote. | More than half of Morrisons shareholders have failed to back the supermarket’s bosses’ pay package in a massive protest vote. |
| Investors representing 48% of its shares voted against the company’s remuneration report, rising to 51% with abstentions, as Morrisons held its annual shareholder meeting at its HQ in Bradford on Thursday. | Investors representing 48% of its shares voted against the company’s remuneration report, rising to 51% with abstentions, as Morrisons held its annual shareholder meeting at its HQ in Bradford on Thursday. |
| The vote comes after shareholder advisory services, including ISS, recommended rejecting the report. The supermarket chain had announced plans to increase the maximum long-term bonus for its chief executive, David Potts, from 240% of his basic salary to up to 300%. Morrisons also softened targets to achieve bonus payouts for future years, including a cut in the earnings-per-share growth target from 6%–13% a year to 5%–10%. At the same time, a maximum target for adding free cashflow over three years was cut from £1.3bn last time to £800m. | The vote comes after shareholder advisory services, including ISS, recommended rejecting the report. The supermarket chain had announced plans to increase the maximum long-term bonus for its chief executive, David Potts, from 240% of his basic salary to up to 300%. Morrisons also softened targets to achieve bonus payouts for future years, including a cut in the earnings-per-share growth target from 6%–13% a year to 5%–10%. At the same time, a maximum target for adding free cashflow over three years was cut from £1.3bn last time to £800m. |
| After the meeting, Andy Higginson, chairman of Morrisons, appeared to blame ISS for the negative shareholder reaction. “We consulted widely with shareholders on the new remuneration policy, which received strong support, with more than 92% in favour, so we were surprised not to get a higher vote in favour of the directors’ remuneration report,” he said in a statement. | After the meeting, Andy Higginson, chairman of Morrisons, appeared to blame ISS for the negative shareholder reaction. “We consulted widely with shareholders on the new remuneration policy, which received strong support, with more than 92% in favour, so we were surprised not to get a higher vote in favour of the directors’ remuneration report,” he said in a statement. |
| “We fundamentally disagree with the ISS analysis of the performance targets. Not only does the board believe the targets to be significant and stretching, but the judgment on what the right measures are goes to the heart of rebuilding the business for the long term – striking the right balance between investment in the business and continued outperformance.” | “We fundamentally disagree with the ISS analysis of the performance targets. Not only does the board believe the targets to be significant and stretching, but the judgment on what the right measures are goes to the heart of rebuilding the business for the long term – striking the right balance between investment in the business and continued outperformance.” |
| Potts earned £2.8m last year, of which £1.7m was an annual bonus. He was also awarded shares that could ultimately generate a long-term bonus of up to £2.04m – or 240% of his salary of £850,000. This year he could earn up to £5.3m, with 48% of the total coming from a long-term bonus worth up to 300% of his basic £850,000 salary. | Potts earned £2.8m last year, of which £1.7m was an annual bonus. He was also awarded shares that could ultimately generate a long-term bonus of up to £2.04m – or 240% of his salary of £850,000. This year he could earn up to £5.3m, with 48% of the total coming from a long-term bonus worth up to 300% of his basic £850,000 salary. |
| Sarah Wilson, chief executive of shareholder information service Manifest, said investors made their own minds up based on the facts. She said directors should take more account of their feedback rather than blaming advisory services. “This instance demonstrates that companies should be listening very hard to what shareholders are saying,” she said. | Sarah Wilson, chief executive of shareholder information service Manifest, said investors made their own minds up based on the facts. She said directors should take more account of their feedback rather than blaming advisory services. “This instance demonstrates that companies should be listening very hard to what shareholders are saying,” she said. |
| Tesco’s chief executive, Dave Lewis, is also expected to come under fire at its AGM on Friday. Lewis earned £4.15m in the year to February, 10% less than the £4.63m in the previous year, after the retailer failed to hit all targets attached to his bonus. But Tesco’s annual report also revealed it had paid £142,000 in stamp duty and legal fees to help Lewis buy a house closer to its headquarters in Hertfordshire. | Tesco’s chief executive, Dave Lewis, is also expected to come under fire at its AGM on Friday. Lewis earned £4.15m in the year to February, 10% less than the £4.63m in the previous year, after the retailer failed to hit all targets attached to his bonus. But Tesco’s annual report also revealed it had paid £142,000 in stamp duty and legal fees to help Lewis buy a house closer to its headquarters in Hertfordshire. |
| Investors have become more proactive in monitoring executive rewards in recent years. Last week more than a fifth of WPP investors voted against Sir Martin Sorrell’s £48m pay package. | Investors have become more proactive in monitoring executive rewards in recent years. Last week more than a fifth of WPP investors voted against Sir Martin Sorrell’s £48m pay package. |
| The issue of pay was not raised directly at the Morrisons’ meeting, the first since the death of Sir Ken Morrison in February. | The issue of pay was not raised directly at the Morrisons’ meeting, the first since the death of Sir Ken Morrison in February. |
| In its annual report, the supermarket chain said the long-term incentive plan involved “stretching performance targets, driving further growth”. These “reflect the financial objectives of the business over the next three to four years and reward achievement of those objectives in a way that is ‘self funding’”, it added. | In its annual report, the supermarket chain said the long-term incentive plan involved “stretching performance targets, driving further growth”. These “reflect the financial objectives of the business over the next three to four years and reward achievement of those objectives in a way that is ‘self funding’”, it added. |
| But ISS said Morrisons had not provided an explanation for softening its target on free cashflow. It added that analysts expected the supermarket to increase earnings per share by 9% a year over the coming three years, so the target of 6% to 13% “appears to leave room for further stretch”. | But ISS said Morrisons had not provided an explanation for softening its target on free cashflow. It added that analysts expected the supermarket to increase earnings per share by 9% a year over the coming three years, so the target of 6% to 13% “appears to leave room for further stretch”. |
| Morrisons | |
| Supermarkets | |
| Retail industry | |
| Executive pay and bonuses | |
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