Shareholders no longer told to vote against FTSE 250 chief’s pay deal

Darktrace (LSE:DARK) has handed its chief executive a 15% pay rise and told shareholders that more needs to be done to bring her remuneration closer to the market norm.

The cyber security company’s annual report reveals Poppy Gustafsson’s total remuneration for 2022/23 amounted to £1.66 million, including her base salary of £498,800.

This year’s increase takes her base pay to £573,563, which the remuneration committee has said remains significantly below the market.

• Invest with ii: Open a Stocks & Shares ISA | ISA Investment Ideas | Transfer a Stocks & Shares ISA

Voting agency Glass Lewis acknowledged the rationale for the rise but initially recommended shareholders vote against the remuneration report at next month’s AGM. That was due to concerns over the level of disclosure on advisor fees paid on Gustafsson’s behalf.

However, upon review, it has identified additional disclosure from the company regarding fees, so has changed its recommendation, suggesting shareholders now vote in favour of the report.

Associated British Foods

When: 11am, Friday 8 December.

Where: Congress Centre, 28 Great Russell Street, London WC1B 3LS.

How to participate: Despite very low uptake of the live broadcast for last year’s AGM, Associated British Foods (LSE:ABF) will continue to provide this facility for shareholders unable to attend in person. However, this service will no longer include question functionality. Proxy voting instructions must be received by 11am, Wednesday 6 December. More AGM details can be found here.

Who’s in the chair? Michael McLintock, the former M&G chief executive, has been in the role since April 2018.

How did the company do in the year to 16 September? Revenues rose 16% to £19.75 billion, with pre-tax profits up 25% to £1.3 billion. Earnings per share improved by 51% to 134.2p, while the payment of a final dividend of 33.1p a share on 12 January lifts the total for the year by 37% to 60p. A £500 million buyback programme concluded at the end of October, with a further £500 million buyback programme set to follow.

How have shares performed? Up 56% at 2,081p (2,372p on Thursday).

How much is the boss paid? George Weston’s salary is due to increase next Friday by 4.5% to £1.2 million, a rise that compares with estimated average UK salary hikes of 4.7% when excluding hourly-paid Primark staff. The single remuneration figure for Weston, only the group’s fourth chief executive since it was founded in 1935, amounted to £4.1 million in 2022/23. The highest sum since 2019 included £1.6 million of cash and deferred share after the annual bonus scheme paid 67.17% of the maximum opportunity. The 58.46% vesting of shares granted in 2020 contributed £1.3 million.

How did last year’s AGM go? The annual remuneration report received 99.11% of votes in favour, while the remuneration policy got 92.37% support. Key changes in the three-year document included the switch to a restricted share plan (RSP), which removes a formula-based approach for long-term incentives. From 2023/24 onwards, this plan will make awards at 125% of salary to both executive directors, bringing Weston in line with finance director Eoin Tonge after his recruitment last year. AB Foods said: “Recent market data reveals that an RSP award of 100% of salary is not competitive, with ABF having the joint lowest opportunity within a comparator group of similar sized UK listed companies.”

• Primark drives AB Foods share price to two-year high
• ii view: reason for optimism at AB Foods as Primark thrives

What’s the view of voting agencies? Glass Lewis recommends shareholders support the resolution on the annual remuneration report.

How’s the company doing on diversity? The board meets the recommendation of the Parker Review that FTSE 100 boards should have at least one person from an ethnic minority background. Recent appointments mean the company is in line to achieve its aspiration for female board representation of least 40%.

Darktrace

When: 11am, Thursday 7 December.

Where: Latham & Watkins, 99 Bishopsgate, London EC2M 3XF.

How to participate: Proxy voting instructions should be returned no later than 11am, Tuesday 5 December. More AGM details can be found here.

Who’s in the chair? Former Capita director Gordon Hurst, who joined the board in 2019.

How did the company do in the year to 30 June? FTSE 250-listed cyber security business Darktrace lifted revenues by 31.3% to US$545.4 million (£434.9 million), driven by 18.3% growth in its customer base to 8,799. A 3.1 percentage point increase in its margin to 15.1% meant adjusted earnings rose by 52.2% to $139.2 million (£111 million), with the per share figure of $0.09 (0.072p) up from zero the previous year. There was no dividend.

How have shares performed? Up 6% at 308.2p (355p on Thursday).

How much is the boss paid? Salaries for both executive directors have been increased by 15% for the current financial year, compared with the average for the workforce of 7.5%. This takes chief executive Poppy Gustafsson’s base salary to £573,563 and finance director Cathy Graham’s to £452,813. Gustafsson’s total remuneration for 2022/23 amounted to £1.66 million, including an annual bonus of £453,400 based on 60.6% of the maximum opportunity. The first vesting under the long-term incentive scheme will be based on performance ending in the current financial year.

Why the big pay rise? Darktrace’s remuneration committee has previously said that salaries and total target remuneration are significantly below market when compared to similar-sized FTSE companies and that steps would be needed to address this. It described the performance of the CEO and CFO since the IPO in 2021 as very strong, “with both of them having significantly grown in role and experience”. Despite the pay rises, the committee said the CEO’s total target remuneration remains significantly below market and that further increases will be needed to bring it closer to market. In addition, the CFO’s award under the long-term incentive plan has been increased to 250% of salary, in line with the level for the CEO.

How did last year’s AGM go? The annual remuneration report was approved with 79.3% support, with Darktrace noting that three shareholders accounted for about two-thirds of the vote against the resolution. One of those to vote against gave the company feedback about the use of discretion in determining remuneration outcomes. However, the remuneration committee said it continued to believe that the decisions in the 2022 report were aligned to the interests of shareholders and wider stakeholders.

• Events at Darktrace should trigger ‘meaningful re-rating’

What’s the view of voting agencies? Glass Lewis acknowledges the rationale for the pay increases, noting that the total remuneration opportunity remains reasonable relative to peers. It believes the issue does not warrant shareholder action. However, it had been concerned by what it called the “paucity of disclosure” surrounding the advisor fees paid on Gustafsson’s behalf of £684,169. This is in connection with proceedings related to one of the company's shareholders. However, Glass Lewis now recommends shareholders support the annual remuneration report after identifying additional disclosures from the company outlining the nature and rationale for the advisor fees paid to the CEO.

How’s the company doing on diversity? At least one member of the board is from an ethnic minority background. Women make up 30% of the board and two senior positions. The company said it is endeavouring to ensure this level improves to at least 40% in order for full compliance with the FTSE Women's Leaders Review