Future facing investor anger over proposed £ 40million CEO bonus program
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Future, the publisher of magazines behind titles such as Country Life and Horse & Hound, has come under fire for a proposed bonus program which could award its chief executive just over £ 40million.
Institutional Shareholder Services and Glass Lewis, two influential advisers to many of the world’s largest asset managers, have recommended investors vote against the proposed salary package at the group’s next annual meeting on February 10.
Two shareholders also shared concerns with the Financial Times over the so-called value creation plan, which could pay employees up to £ 95million in stock-based awards each year over three years. based on total shareholder return, a measure that includes the share price. performance and dividends.
Future’s proposal has stoked shareholder concerns that companies are using the pandemic to introduce executive bonus policies that are potentially very generous. Last month, a third of the shareholders of Cinemonde outraged at a bonus scheme that could award the channel’s chief executive and his deputy up to £ 65million each in shares.
One of the top 30 shareholders said Future’s annual meeting next week was “another controversial one.” “Expect a significant decline from shareholders,” he added.
Neville White, head of responsible investment policy and research at EdenTree Investment Management, which owns a small stake in Future, expressed concern about “excessive wage drift” at the company.
The program proposes that, as long as the company’s stock price increases by at least 10% per year from September 2020 to September 2025, all employees will be granted shares in three tranches, each capped at 95 million. pound sterling. These rewards will be acquired from 2023.
Chief executive Zillah Byng-Thorne is entitled to 14.3% of that pot, up to £ 13.6million per year. Ms Byng-Thorne, who received a total of £ 3.7million last year, is also expected to receive a pay hike of more than 21% to £ 575,000.
About a fifth of the pool will be reserved for senior executives, including the CEO’s share.
Future said he had “consulted closely” with shareholders and that the proposal reflected “constructive comments,” adding that the majority of the potential bonus would be distributed among its 2,300 employees. A previous regime only rewarded the 50 most senior administrators.
“The proposed plan is directly aligned with the interests of shareholders. . . the maximum potential award would require the company to create over £ 4 billion of additional shareholder value over the next five years, ”he said.
Ms Byng-Thorne took over the once high-loss business in 2014 and transformed it, thwarting a downward trend in earnings in the print media industry. The editor was the best performer on the FTSE 350 in 2019 and recovered assets worth around £ 1.1bn, including rival TI Media and GoCompare comparison site.
The Future share price rose about 20 percent last year.
Although she argued that the program would be “instrumental in mobilizing top talent,” ISS said there was “a lack of sufficiently compelling rationale as to why the existing compensation arrangements for [executive directors] are not considered to already provide an adequate incentive ”.
Glass Lewis said he had “serious reservations” about supporting the policy, adding that it could lead to “extremely high payments to executives based largely on general economic factors beyond management’s control.” .
But one of the top 30 shareholders offered his support, arguing that the 10 percent share price hurdle was higher than “typical long-term stock returns of 6 to 8 percent per year” and that there was a “reasonable foreclosure” with executives expected to hold the shares until 2025.
Several companies, including Informa, SIG, Provident Financial and McBride, have proposed what is called value creation or restricted action plans which reward executives in large part because of stock price movements since the pandemic.
Mr White said companies turned to these programs because the Covid disruption made other performance metrics difficult to predict, but added that “escalation in share prices is generally not controlled by management “.