Four occasions when it's right to back big director salaries

There are plenty of directors who shouldn't receive the ridiculous sums of money they are paid, but there are times when bosses deserve what they get. 

A £142,000 bonus for Royal Mail (LSE:RMG) boss Simon Thompson and the £6.5 million total pay of  National Grid (LSE:NG.) CEO John Pettigrew will go before shareholders at AGMs this month.

Thompson’s short-term bonus amounted to 18% of the maximum opportunity after no awards were made under benchmarks for quality of service or operating profit.

Pettigrew’s £6.5 million haul was due to shares worth £4 million from a long-term incentive scheme, having overseen a shareholder return of 52% in three years. At a time of high energy bills, the pay committee decided not to apply discretion to his £1.1 million annual bonus. 

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Burberry 

When: 2pm, Tuesday, 12 July.

Where: Horseferry House 2, 1a Page Street, London, SW1P 4PQ.

How to participate: This will be Burberry Group's (LSE:BRBY) first hybrid meeting, with shareholders able to ask questions and vote on the resolutions electronically or in person. Questions in advance of the meeting should be sent to AGM2022@burberry.com by 5.30pm on 7 July, with the deadline for the return of proxy voting forms 2pm, 8 July. More AGM details can be found here.

Who’s in the chair? Former Kingfisher chief executive Gerry Murphy, who was appointed in 2018.

How did the company do in the year to 2 April? Revenues of £2.8 billion were 21% higher, or 10% stronger at constant currency than the pre-pandemic period two years earlier. Adjusted operating profits were ahead of expectations at £523 million and reported earnings per share of 97.7p were 5% ahead at a reported level. A final dividend of 35.4p a share for payment on 5 August took the figure for the year to 47p, restoring a pay-out ratio of 50%. The board also approved a £400 million share buyback for 2022/23.

How have shares performed? Down 13% to 1,673.5p (1,641p on Thursday).

How much is the boss paid? Jonathan Akeroyd joined from Gianni Versace in March on a salary of £1.1 million, which will not be subject to an increase for 2022/23. Burberry also compensated Akeroyd for incentives that he forfeited on leaving his previous employer. This amounted to £4.3 million in the annual report, reflecting £769,000 in relation to his 2021/22 bonus plus the award of 224,479 Burberry shares with vesting dates of between 2022 and 2024. A further 101,377 Burberry shares is due to vest subject to the results of his previous employer for 2021/22, with this figure due to be disclosed in next year’s annual report. Akeroyd’s remuneration opportunities at Burberry include 200% of salary under the annual bonus plan and 162.5% through the longer-term Burberry Share Plan.

What about the former boss? Marco Gobbetti, who left Burberry on 31 December, did not receive a bonus for 2021/22 and all unvested share awards lapsed on his departure. His single figure remuneration came to £1.2 million. Julie Brown, the current chief operating and financial officer, got a total of £2.7 million for the year after the annual bonus scheme paid 94% of the maximum opportunity and the three-year incentive share delivered 22%.

What’s the view of voting agencies? Glass Lewis recommends shareholders vote in favour of the annual remuneration report.

How did last year’s AGM go? The annual remuneration report was approved with 94.45% of votes in favour.

How’s the company doing on diversity? Burberry has been recognised as a top performer in the inaugural FTSE Women Leaders report, having exceeded its recommendations with 45.5% of board members and 53.7% of executive committee members and “direct reports” being female. There are two directors from an ethnic minority background on the board, which is above the recommendation of the Parker Review report.

National Grid

When: 10am, Monday 11 July.

Where: Royal Lancaster London, Lancaster Terrace, London W2 2TY.

How to participate: An electronic meeting platform will enable shareholders to watch and hear the proceedings, ask questions and vote, all in real time. Questions can be pre-submitted via the electronic meeting platform up until 10am, Thursday 7 July. Proxy voting instructions must be received by the same deadline. More AGM details can be found here.

Who’s in the chair? BP senior independent director Paula Rosput Reynolds has been in the role since May 2021.

How did the company do in the year to 31 March? Operating profits of £4 billion were up 11% on a proforma basis, reflecting growth in UK electric transmission net revenues to fund higher investment. Earnings per share were 10% higher at 59.1p and the dividend for the year came to 50.97p, an increase of 3.7% over the previous year. This includes a final dividend of 33.76p, which is due to be paid on 17 August.

How have shares performed? Up 36% to 1,172.4p (1,052p on Thursday).

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How much is the boss paid? The salary of John Pettigrew has been increased this month by 3.5% to £1.09 million, compared with a rise of 4% for the wider UK workforce. His single figure remuneration for 2021/22 came to just over £6.5 million, up from £5.4 million the year before. Just under £4 million of this latest figure was generated by shares awarded under the 2019 long-term performance plan. Pettigrew achieved 74.22% of the maximum opportunity after share price growth of over 30% in the three-year performance period, which in addition to dividends resulted in a total shareholder return of 52%. The annual performance plan for 2021/22, which is 60% based on financial performance, accounted for a further £1.1 million after Pettigrew achieved 85.2% of the maximum opportunity. The remuneration committee decided not to apply discretion to the annual bonus outcome.

What’s in the new remuneration policy? The current policy was last approved in 2019, meaning a fresh binding vote needs to take place at this AGM. Financial measures will comprise at least 60% of the long-term incentive plan, with the new policy introducing an ESG (environmental, social, governance) measure that’s expected to make up 20%. Pension contributions for executive directors will be aligned with the level available to the UK wider workforce.

Is there a climate-related vote? The company’s Climate Transition Plan sets out its  greenhouse gas emissions targets and pathway to becoming a net zero business by 2050. It will go before shareholders in a non-binding advisory vote. Progress reports will follow every year, with a further advisory vote due no later than 2025. 

How did last year’s AGM go? The directors’ remuneration report was approved with 96.79% of votes in favour.

What’s the view of voting agencies? Glass Lewis has recommended support for the annual remuneration report, the new remuneration policy and the Climate Transition Plan.

How’s the company doing on diversity? There are six female directors, accounting for 46% of the board. The company exceeds the Parker Review target for FTSE 100 boards to have at least one director from a non-white ethnic minority. 

Royal Mail

When: 11am, Wednesday 20 July.

Where: Park Inn by Radisson, North Street, York, YO1 6JF.

How to participate: Shareholders attending virtually will be able to see and hear the directors, ask questions and vote in real time. Proxy voting instructions must be received by Equiniti no later than 11am, Monday 18 July. Shareholders may also submit questions on the business of the meeting in advance to shareholderquestions@royalmail.com. More AGM details can be found here. 

Who’s in the chair? The former British Airways chief executive Keith Williams has been in the role since May 2019, a period including eight months as interim boss.

How did the company do in the year to 27 March? Revenues of £12.7 billion were 0.6% higher, driven by international operation GLS after a 1.6% decline for the core Royal Mail business following a very strong pandemic performance the previous year. Adjusted profits of £707 million were 6.5% higher and earnings per share lifted 15.2% to 60p. A final dividend of 13.3p a share is due to be paid on 6 September, bringing the total for 2021/22 to 20p a share.

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How have shares performed? Down 30% at 360.1p (269.7p on Thursday).

How much is the boss paid? Simon Thompson’s salary increased in April to £543,750, a 3.6% rise in line with the wider workforce. His total remuneration for 2021/22 came to £753,000 after the annual bonus scheme paid £142,000. This award was based on 17.97% of the maximum opportunity, with no payouts under the benchmarks for quality of service or operating profit. The strong financial performance of GLS meant its boss Martin Seidenberg got 95% of his bonus opportunity, leading to overall remuneration of £1.67 million.

What’s the view of voting agencies? Glass Lewis recommends shareholders vote in favour of the annual remuneration report.

How did last year’s AGM go? The annual remuneration report was supported with over 99.7% voting in favour.

How’s the company doing on diversity? The proportion of women on the board was 40% at the end of March but this is due to drop to 33% after the AGM. The board complies with the Parker Review target to have at least one director from an ethnic minority background. The company’s priorities for 2022/23 include accelerating progress in female and ethnic representation across senior leadership roles.

Dr Martens

When: 9.30am, Thursday 14 July.

Where: 28 Jamestown Road, Camden, London, NW1 7BY.

How to participate: Questions in advance of the meeting should be sent to company.secretariat@drmartens.com by 12 July.  Votes can be cast via sharevote.co.uk or through proxy instructions before 9am, 12 July. More details about the Dr. Martens Ordinary Shares (LSE:DOCS) AGM can be found here.

Who’s in the chair? Former Somerfield and Matalan chief executive Paul Mason.

How did the company do in the year to 31 March? Total revenues of £908.3 million were 18% higher, up 22% on a constant currency basis. Adjusted profits lifted 43% to £214.3 million and underlying earnings per share improved 21% to 171.4p. A final dividend of 4.28p, which is due to be paid on 19 July, took the total to 5.50p for a payout ratio of 30%.

How have shares performed? Down 47% at 238.8p (237.4p on Thursday).

How much is the boss paid? Kenny Wilson’s salary increased to £721,000 in April, in line with a 3% rise for the wider workforce. His annual bonus of £906,000 for 2021/22 was based on 65% of the maximum opportunity, taking his single figure remuneration to £1.66 million. 

What’s the view of voting agencies? Glass Lewis recommends shareholders vote in favour of the annual remuneration report.

How did last year’s AGM go? The binding vote on the remuneration policy was approved with 99.2% in favour, while the directors’ remuneration report got support of 99.62%.

How’s the company doing on diversity? The gender balance of the board is 38% female. The company also meets the Parker review recommendations on ethnic diversity.