AGM alert: huge pay rises for two FTSE 100 bosses

The rewards for running top performing Compass Group (LSE:CPG) and Sage Group (The) (LSE:SGE) are set to become far more lucrative after their bosses were awarded pay rises of 21% and 30% respectively.

Both companies have hiked remuneration in order to reflect their increased size and scope, as well as address retention and recruitment concerns in their US-dominated marketplaces.

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Compass CEO Dominic Blakemore’s salary has increased to £1.4 million, with planned changes to the caterer’s remuneration policy also boosting his variable pay opportunity.

The proposed 30% pay rise for Sage boss Steve Hare is being staggered over two years, increasing his salary to £1.2 million by 2026. He got £785,000 in 2021.

Hare’s long-term bonus opportunity is also increasing, subject to the approval of shareholders at the Sage AGM on 6 February. Compass is holding its meeting on the same day.

easyJet

When: 10am, Thursday, 13 February.

Where: Hangar 89, London Luton Airport, Luton, Bedfordshire, LU2 9PF.

How to participate: The meeting is available to attend via the Lumi electronic meeting platform. easyJet (LSE:EZJ) shareholders should submit voting instructions no later than 10am, Tuesday 11 February. More AGM details can be found here.

How will EU ownership rules impact shareholders? EU regulations require all airlines with EU operating licences to be majority owned and controlled by nationals of one of the member states of the EU. To ensure that it keeps to the permitted maximum 49.5% of non-EU ownership, easyJet has a contingency plan where it suspends voting rights in respect of certain shares. This is on a "last in, first out" basis, with those affected notified by post.

Who’s in the chair? Former Royal Bank of Scotland and RSA Insurance chief executive Stephen Hester has been in the role since December 2021.

How did the company do in the year to 30 September? Revenues increased by 14% to £9.3 billion, primarily due to an 8% increase in capacity to 100.4 million seats, positive ticket pricing and an increase in ancillary revenue including easyJet holidays.  Costs excluding fuel rose by 14% to £6.5 billion. Headline profit of £610 million represented a 34% improvement and the equivalent of £6.08 per seat as the group looks to a medium-term target of £7-£10. Earnings per share rose to 61.3p while the company intends to pay a dividend of 12.1p on 21 March, up 169% and equivalent to 20% of 2024’s headline profit after tax.

How have shares performed? Up 22% to 520p (497.5p on Thursday).

How much is the new boss paid? Kenton Jarvis has been appointed on a base salary of £800,000, below the level paid to his predecessor Johan Lundgren. Jarvis received a total of £1.8 million as finance boss in 2023/24, including an annual bonus of £840,540.

How much was Lundgren paid? Total remuneration in his final full year in charge amounted to £2.8 million, his largest annual sum since joining the company in December 2017. The total included cash and deferred shares worth £1.36 million after the annual bonus scheme paid 84% of the maximum opportunity. Long-term incentives vested for the first time in his tenure, contributing £607,000 to the total. He is eligible for a 2025 bonus in relation to work up to December 2024 and he will be subject to a shareholding requirement of up to two years.

How was variable pay determined? The annual bonus was based 30% on profit performance, 50% on a scorecard of key performance targets including costs, on-time performance and customer satisfaction and 20% on individual performance. The Restricted Share Plan award made in February 2022 was subject to three underpins, including a minimum liquidity target and governance performance.

How did last year’s AGM go? The annual remuneration report was approved with 91.76% of votes in favour.

What’s in the new remuneration policy? The Restricted Share Plan was introduced during the last policy cycle in 2021 and approved by 73.38% of shareholder votes at the 2022 AGM. In light of the change of CEO, the company is not planning any significant changes to the structure of executive remuneration. It added: “As the business evolves, the committee will continue to review the incentive plan structure, aiming to incorporate an element linked to achieving the company’s medium term targets.”

How is the company doing on diversity? The board’s gender split is 40%, including one senior role. It aims for 40% representation on the Airline Management Board by 2025, up from 33% at the end of the financial year. One board member is from an ethnic minority background.

Compass 

When: 12 noon, Thursday, 6 February.

Where: Rugby House, Allianz Stadium, 200 Whitton Road, Twickenham, Middlesex TW2 7BA.

How to participate: Online or postal proxy voting instructions must be returned by 12 noon on Tuesday 4 February. More AGM details can be found here.

Who’s in the chair? Ian Meakins, the former chief executive of Wolseley, Travelex and Alliance Unichem, took on the role in December 2020.

How did the company do in the year to 30 September? Organic revenue growth of 10.6% and an improved operating margin of 7.1% led to the underlying operating profit rising by 16.4% on a constant-currency basis to $3 billion. Earnings per share rose 15% to 119.5 US cents. In line with a policy of 50% of underlying earnings, the catering giant intends to pay a final dividend of 39.1 US cents a share on 27 February. This results in a total for the year of 59.8 US cents.

How have shares performed? Up 20% to 2,394p (2,673p on Thursday).

How much is the boss paid? The salary of Dominic Blakemore is set to increase by 20.7% to £1.4 million, effective 1 January 2025. His total remuneration for 2023/24 amounted to £9.5 million, up from £7.5 million the year before and the most for the role in the past decade. The maximum award under the annual bonus scheme generated £2.3 million and the 100% vesting of long-term incentives granted in 2021/2022 contributed £5.9 million. Compass said: “The remuneration levels in 2024 reflect the group’s exceptional performance, where record levels of performance have been achieved in many areas, and strong shareholder returns delivered.”

How else is Blakemore’s pay changing? His annual bonus opportunity is set to increase to 250% of salary from 200% and for long-term incentives from 400% to 500% of salary. This means the total opportunity for Blakemore rises to £11.9 million, or £15.3 million in the event of share price appreciation of 50% on the long-term incentive shares. The planned changes are contained in the new remuneration policy, which is subject to a binding vote at this year’s AGM. The policy was last approved in 2022 with 67.50% of votes in favour.

What’s the company say about the big pay rise? The new figure means Blakemore’s salary will be broadly in line with the median of the FTSE 30. Compass said it considered whether to phase implementation of the increase but said that the length of Blakemore’s tenure and “sustained exceptional performance” meant an immediate change was appropriate. It said this approach is also applied in other parts of the organisation.

How has Compass performed under Blakemore? Since his appointment on 1 January 2018, Compass points out that it has generated total shareholder returns of 41.1% up until 30 September. This compares to a FTSE 100 index return of 25.4% and no more than 4% at its three closest peers. It said its performance resulted in the creation of £14.7 billion in shareholder value. Compass was the 14th largest company by market capitalisation in the FTSE 100 at the end of September, the ninth largest in terms of revenues and by far the largest employer with 579,126 staff compared with Tesco as the next largest at 225,659. 

How do Compass pay levels compare? It points out that it has previously lost senior staff because they were offered remuneration packages significantly above what it is able to offer them without compromising the company’s pay structure. It said of the policy changes: “We have not sought to replicate US pay practices for our executive directors, but we remain acutely aware of the need to remunerate fairly in local markets and of the wider impacts across the senior team of being a global player.” It adds that the policy changes are more than just about a certain benchmarking position and are considerate of experience, which is why it has not utilised the full headroom within the proposed 2025 policy for the group’s chief financial officer and North American chief operating officer in the 2024/25 financial year.

How was variable pay determined in 2023/24? Profit growth of 16.4% accounted for 60% of the annual bonus, while the cash conversion metric was also exceeded. Performance measures used in long-term incentives were 40% on return on capital employed, 40% on adjusted free cash flow and 20% on relative total shareholder return.

What’s the view of voting agencies? Glass Lewis is concerned by the significant increase in variable incentive opportunity, which together with Blakemore’s new base salary could lead to an overall increase in remuneration of approximately 46% in 2025. It added: “Nonetheless, we acknowledge the growth in size and complexity of the business since the appointment of the group CEO and the pay compression issues experienced by the company, particularly noting that over two thirds of the company's revenues are generated in North America.” The agency recommends shareholders vote in favour of the new three-year remuneration policy and support the advisory vote on the annual remuneration report.

How did last year’s AGM go? The annual remuneration report was approved with 95.69% of votes in favour.

How’s the company doing on diversity? Three members of the board are from a minority ethnic background. The gender split of the board is 43% female, including one senior role.

Sage

When: 12 noon, Thursday 6 February.

Where: Cobalt Park Way, Cobalt Park, Newcastle upon Tyne, NE28 9EJ.

How to participate: The deadline for the return of proxy voting instructions is 12 noon, Tuesday 4 February. More AGM details can be found here.

Who’s in the chair? Andrew Duff has held the role since October 2021. The former chief executive of npower was chair of Severn Trent between 2010 and 2020.

How did the company do in the year to 30 September? Underlying revenues increased by 9% to £2.3 billion, reflecting the success of the software group’s subscription-based model. Operating profit lifted by 21% to £529 million and underlying earnings by 16% to £622 million. A final dividend of 13.5p a share is due to be paid on 11 February, resulting in an increase for the year of 6% to 20.45p  

How have shares performed? Up 4% to 1,024.5p (1,306.5p on Thursday).

How much is the boss paid? Steve Hare’s base salary is set for a 15% increase to £1.06 million before a further 15% rise to £1.2 million in 2026. The changes, which are proposed alongside an overhaul of remuneration policy, follow a rise of 9.9% to £925,000 in 2024. He got £785,000 in 2021. Hare’s total remuneration for 2023/24 amounted to £4.6 million, up from £4.4 million the year before and the largest sum paid to the company’s chief executive in the past decade. The latest figure included an annual bonus of £885,000, which is based on 56% of the maximum opportunity, and £2.7 million from the 95.1% vesting of long-term performance plan shares.

How is remuneration policy changing? The annual bonus opportunity remains unchanged at 175% of salary but with the level of deferral into shares reduced to 15% when the shareholding threshold is met. Sage had wanted to increase the cap on the long-term incentive plan from 300% of salary to 450% in order to align the overall pay opportunity to the level of value created in Sage’s three-year plan. It is now 400% for the chief executive and chief financial officer following consultation with major shareholders. The chief executive’s maximum opportunity under the policy is £7.3 million, rising to £9.5 million with share price appreciation.

How has Sage performed under Hare? Subscription levels now stand at 82% of revenues compared with 46% when he was appointed in 2018. This has led to a 57% increase in recurring revenue and almost 400% increase in Sage Business Cloud revenue. Financial performance has been strong, with revenue growth accelerating towards double digits in recent years, and earnings per share growth currently ahead of this. Sage points out it has achieved a total shareholder return (TSR) of 115% compared with 45% for the FTSE 100, and created almost £7 billion of shareholder value.

Why the changes? Sage saidHare’s average bonus and performance share plan payout between 2018 and 2023 has been significantly below the FTSE 100 median, despite the company’s strong performance. Sage achieved upper decile level total shareholder return over this period, while Hare’s realised pay was lower quartile. Consequently, the CEO’s realised pay has significantly lagged the market, despite Sage delivering superior shareholder returns. It is committed to achieving stronger alignments to retain and motivate senior executives, adding that its market is highly competitive and heavily influenced by US-based companies. It said: “For example, when seeking to hire for our President North America role in 2022, we found that external candidates’ expectations of the remuneration package were materially higher than our offer range, and if met, would have significantly exacerbated pay compression at executive director levels.”

What’s the view of voting agencies? Whilst having concerns about the significant increases in variable incentive opportunity, Glass Lewis notes that the company has a considerably higher ranking in FTSE indices than at the time of the previous policy renewal. “Further, we recognise the retention and recruitment issues experienced by the company in recent years.” In addition,  it expects the company to continue to set “appropriately stretching” targets for long-term incentives. The agency recommends shareholders vote in favour of the new three-year remuneration policy and support the advisory vote on the annual remuneration report.

How did last year’s AGM go? The annual remuneration report was approved with 98.30% of votes in favour.

How’s the company doing on diversity? Two members of the board are from an ethnic minority background. The gender split is 40% female, including one senior role.