Greed is NOT good
MoS investigation reveals that a third of Britain’s top firms would have been blacklisted by PM over boardroom pay
ALMOST a third of Britain’s biggest firms have suffered a revolt on pay that would have seen them blacklisted under the Prime Minister’s plans to ‘ name and shame’ greedy bosses, a major investigation by The Mail on Sunday has found.
The analysis of about 400 documents over four years reveals the extent to which firms are feathering the nests of their highest paid executives in a system that appears to be out of control.
The investigation reveals that the boardroom pay and incentive plans of 30 of the 100 largest companies listed on London’s stock market have faced a rebellion of more than 20 per cent of shareholders – the limit of tolerance set by Theresa May last month. Of those, 19 have faced pay revolts in the past two years, suggesting the problem is worsening, with the divide widening between executives and rank and file staff, who are receiving far meaner pay rises.
Among the worst offenders are Morrisons – with the pay awarded to both former boss Dalton Philips and his replacement at the supermarket Dave Potts under fire – as well as advertising giant WPP and construction supplier Ashtead. All have been struck by three pay revolts in the past four years.
A further six have two rebellions blighting their name, including pharmaceutical giant AstraZeneca, fashion label Burberry, software developer Micro Focus, healthcare provider NMC Health, publisher Pearson and consumer goods maker Reckitt Benckiser.
Theresa May described the trend to higher pay and more generous perks for top bosses as the ‘unacceptable face of capitalism’.
Roger Barker, head of corporate governance at the Institute of Directors, said: ‘It’s clear that executive pay has got out of kilter with company performance and there is growing pressure on shareholders to take a stand.’
Among the many complaints about how executive pay is structured is that many bosses can earn several times their standard pay by meeting easy targets.
And when they fail, directors are often given ‘golden parachute’ payments that are beyond the dreams of their employees, another factor that has attracted shareholder ire.
The Prime Minister said she would require firms to report the pay gap between executives and staff, but some critics argued the measures did not go far enough.
The Mail on Sunday last week revealed that Britain’s top 20 bosses received £237 million a year between them. More than half that eye- watering sum was shared between the five highest paid chief executives, including WPP boss Sir Martin Sorrell, who was rewarded with £48.1 million in just one year.
Morrisons faced its third revolt earlier this year when it was criticised for setting bonus targets for chief executive Potts that were too soft. In its annual report, released in May prior to the meeting, Morrisons said it wanted to increase Potts’ bonuses ‘ specifically in response to shareholder feedback’.
Potts, who is otherwise popular with shareholders for raising profits and adding £1 billion to the firm’s market value since his arrival, was paid £2.8 million last year.
However, 48 per cent of shareholders voted against the plan. The vote prompted a furious reaction from Morrisons chairman Andy Higginson, who said he ‘fundamentally disagreed’ with groups that had advised shareholders to vote against the supermarket’s plans. He said the board regarded the targets as ‘significant and stretching’.
Meanwhile, in January shareholders appeared to win a rare victory at Imperial Brands, when they protested at plans to increase chief executive Alison Cooper’s pay.
The tobacco group withdrew a vote on a new pay policy at the annual meeting. The plan would have increased Cooper’s earning potential f rom £ 7. 1 million to £8.5 million for next year. Instead, her ceiling rose to £7.4 million.
Barker said: ‘If you are the chief executive of a big listed company there is now a lot of transparency over how much you earn, in a way there isn’t if you work for a hedge fund, private equity firm or a big legal or accountancy firm.
‘There is more pressure from the media, public, politicians and wider civil society. That in turn is putting pressure on big investors.
‘ But it’s too early for compla- cency, and shareholders still need to keep doing their jobs.’
Among other firms that have suffered major revolts this year are AstraZeneca, whose boss Pascal Soriot was paid £13.4 million last year. At the annual meeting, 39 per cent of shareholders voted against the executive pay plan. Thomson Holidays operator Tui was also criticised for not giving shareholders a chance to vote on pay at all.
Professional advisory services, such as Pirc, which advises local authority pension funds, among others, and American firms ISS and Glass Lewis, are often behind significant revolts.