AGM alert: will shareholders back this $14m US pay deal?

A much-improved pay deal for the US-based chief executive of Sunbelt Rentals business Ashtead Group (LSE:AHT) is set to keep the issue of American-style compensation in the AGM spotlight.

The new remuneration policy increases Brendan Horgan’s opportunity to $14 million (£10.8 million), including through restricted stock awards not usually part of FTSE 100 pay packages.

The company says its success relies on continuing to attract and retain high-calibre talent in the US marketplace, which is where it generates most of its profits.

But proxy voting agency Glass Lewis has recommended shareholders vote against the remuneration policy, calling the increased long-term incentive opportunity excessive.

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In May, Smith & Nephew (LSE:SN.) saw 43.22% of votes cast against its remuneration policy after the medical devices firm proposed increasing US-based chief executive Deepak Nath’s maximum opportunity to about $11.8 million (£9.5 million).

Ashtead

When: 11.30am, Wednesday 4 September.

Where: Wax Chandlers Hall, 6 Gresham Street, London, EC2V 7AD.

How to participate: Proxy voting instructions should be returned no later than 11.30am, Monday 2 September. More AGM details can be found here.

Who’s in the chair? Paul Walker, who joined the board in 2018, is the former chief executive of Sage.

How did the company do in the year to 30 April? The Sunbelt Rentals business generated 92% of revenue and 99% of adjusted operating profit in North America in 2023-24. Revenues rose 12% to $10.86 billion (£8.4 billion) as the company grew market share in the US, where it is the second-largest player. Adjusted profits fell by 2% to $2.11 billion (£1.6 billion), with earnings per share broadly flat at 385.5 US cents. A final dividend of 89.25 US cents a share is due to be paid on 10 September, resulting in a 5% increase for the year to 105 US cents.

How have shares performed? Up 28% to 5,842p (5,182p on Thursday). The group has created £30 billion of shareholder value over 10 years, significantly ahead of the FTSE 100 and S&P 500 Industrials indices over that time frame.

How much is the boss paid? Brendan Horgan’s base salary rose in May by 4% to $1.17 million (£900,000), which Ashtead said is median for US peers and bottom quartile for comparable FTSE size peers. His total remuneration for 2023-24 amounted to $7.3 million (£5.6 million), which compares with $8.5 million the year before. The total figure includes cash and deferred shares worth $549,000 (£422,640) after the annual bonus scheme paid 36.6% of the maximum based on the benchmarks of adjusted pre-tax profit and free cash flow. The 93.4% vesting of long-term incentives granted in 2021 contributed $2.3 million (£1.8 million) and tailored incentives linked to the delivery of the company’s Sunbelt 3.0 strategy vested in full with a value of $3.1 million (£2.4 million).

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What’s changing in the remuneration policy? The policy, which was last approved at the 2021 AGM with 39.3% of votes against, is being updated to bring the company’s pay practices closer to the market norms in the US. This means about 400 US-based executive directors will be eligible to receive Restricted Stock Unit (RSU) awards alongside their performance-based PSU awards. In the case of Horgan, the maximum RSU opportunity will be 150% of salary. The bulk of the annual long-term incentive opportunity will continue to be PSU awards, with the maximum for Horgan increasing to 700% of salary from 467% in 2023. Horgan’s total remuneration opportunity under the new policy is nearly $14 million (£10.8 million).

What’s the company say? Ashtead recognises that the use of RSU awards is counter to current FTSE norms but points out that 75% of senior leadership roles, including the chief executive, are held by US citizens and based in the US. It said a review highlighted a “material disconnect” between Horgan’s remuneration opportunity and the competitive landscape in the US. It warned of a material business risk for Ashtead that remuneration becomes a barrier to, rather than enabler of, retaining, attracting and motivating critical talent. Remuneration committee chair Lucinda Riches added: “Ashtead is unique. It is a US business that is listed in the UK. As a result, shareholders have enjoyed significant benefits by being exposed to the North American markets. However, shareholders must recognise that the competitive context for executive talent for Ashtead differs materially from typical UK norms.” 

What’s the view of voting agencies? Glass Lewis has recommended shareholders vote against the remuneration policy, reportedly highlighting concerns about the significant quantum increase without a compelling rationale for its necessity.

How did last year’s AGM go? The annual remuneration report was approved with 96.6% of votes in favour. 

How’s the company doing on diversity? The board gender split is 44% female, but none of the senior roles are held by a woman. One member of the board is from a minority ethnic background, in line with the target set out by the Parker Review. 

Halfords

When: 3pm, Friday 6 September.

Where: Halfords Support Centre, Icknield Street Drive, Washford West, Redditch, B98 0DE.

How to participate: Proxy voting instructions should be returned no later than 3pm, Wednesday 4 September. More AGM details can be found here.

Who’s in the chair? Former British Airways chief executive Keith Williams was appointed in July 2018. He is also chair of Royal Mail business International Distribution Services.

How did the company do in the year to 29 March?Halfords Group (LSE:HFD), which operates 387 stores and 639 garages, increased revenues by 7.9% to £1.7 billion. Challenging market conditions and ongoing cost inflation meant underlying pre-tax profit fell 7.9% to £43.1 million, or 18.3% to £36.1 million including discontinued operations. A final dividend of 5p a share is due to be paid on 13 September, with the 20% reduction in full year dividend to 8p a share in line with the 21.1% drop in earnings per share to 12.7p.

How have shares performed? Down 6% to 160.5p (140.8p on Thursday). 

How much is the boss paid? Graham Stapleton’s salary is £616.700 after a 3% pay rise took effect from 1 October. In light of the overall shareholder experience and profit performance, the remuneration committee and the company’s two executive directors agreed that no bonus should be paid. A bonus outcome of 28.2% of the maximum would otherwise have been payable. The 2021 Performance Share Plan lapsed in full after targets including underlying earnings per share were not met. Stapleton’s single figure of remuneration amounted to £650,440, down from £1.2 million the previous year when the long-term incentive scheme contributed £534,462.

What about remuneration for this year? The remuneration committee has increased the bonus scheme’s weighting on financial metrics to 90% overall. This is split 60% on underlying group profit before tax, 20% on free cash flow and 10% on cost as a percentage of revenue. The remaining 10% is based on strategic measures. It is not proposed to make any amendments to performance measures under the long-term incentive plan. 

How did last year’s AGM go? The annual remuneration report was approved with 99.22% of votes in favour. The new three-year remuneration policy got 99.23% support.

How’s the company doing on diversity? The board gender split is 50% female, including in one senior role. One of the directors is from a minority ethnic background. 

Babcock International

When: 10.30am, Thursday 19 September.

Where: Grosvenor House Hotel, Park Lane, London, W1K 7TN.

How to participate: Proxy voting instructions must be returned no later than 10.30am, Tuesday 17 September. More AGM details can be found here.

Who’s in the chair? Ruth Cairnie, who spent four decades at the oil giant Shell, was appointed in July 2019. She is a former board director of Rolls-Royce and Associated British Foods.

How did the company do in the year to 31 March? Revenues rose 11% on an organic basis to £4.39 billion, driven by strong growth in Nuclear and Land. Underlying profit increased 34% to £237.8 million, which includes the £90 million loss on its legacy contract to build five Type 31 frigates for the Royal Navy. Free cash flow of £160 million was significantly better than expected. Dividends resumed, with the total of 5p including the 30 September payment of 3.3p a share.

How have shares performed? Up 74% to 520p (529.5p on Thursday). 

How much is the boss paid? David Lockwood’s salary for the current financial year has increased by 11% to £905,760. His total remuneration for 2023-24 amounted to £3.9 million, up from £3.3 million the year before. This included £730,000 of cash and deferred shares after the annual bonus scheme paid 59.6% of the maximum opportunity. The 100% vesting of long-term incentives contributed £2.15 million to the overall figure.

Why the big salary increase?Babcock International Group (LSE:BAB) points out that Lockwood, who joined the company in September 2020, has previously accepted only one very limited salary increase. It said: “Since his appointment, Mr Lockwood has delivered a consistently strong performance in leading the reset of the company, a large and complex organisation, to the benefit of all its stakeholders.”

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How was variable pay determined? There was no payout under the underlying operating profit element of the annual bonus scheme due to the impact of Type 31 loss, but the underlying operating cash flow element paid out in full. Among five non-financial measures that determined the remaining 20% of the bonus, Lockwood exceeded expectations on his target to strengthen the company’s position in the UK. The vesting of long-term incentives was tied to the three-year performance on cumulative underlying free cash flow and relative total shareholder return.

How did last year’s AGM go? The votes on the annual remuneration report and the new three-year remuneration policy were approved, both with 98.29% of votes in favour.

How’s the company doing on diversity? Female board representation stands at 40%, including one senior position. One board member is from an ethnic minority background.