Your vote counts: what to expect at Tesco and Scottish Mortgage AGMs

Tesco puts its bonus plan to shareholders and Scottish Mortgage investors get a vote on one of the trust's rules.

Another big company has been given a rough ride by shareholders after making adjustments to its executive bonus arrangements in light of the Covid-19 pandemic.

The decision of hospitality company Whitbread to allow chief executive Alison Brittain and other executives to take a two-year view on bonus payments drew a strong response at the company's AGM, with 35% of votes cast against the remuneration report on Thursday.

The company is not paying a bonus for the year in which its took government support, but is allowing those which would have been earned to be carried over subject to performance. It hopes this will ensure management are incentivised for the recovery.

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A week ago, supermarket chain Morrisons (LSE:MRW) suffered the biggest revolt of the AGM season so far, with 70% of votes failing to back its remuneration report following the company's decision to exclude Covid-19 costs of £290 million from annual bonus calculations.

Tesco (Friday 25th)

A decision not to adjust bonuses for Covid-19 means the supermarket giant's pay report is unlikely to suffer the same backlash as the one endured by rival Morrisons.

Bradford-based Morrisons used upward discretion because the £290 million of costs stemmed from ensuring continued food supply and the protection of staff and customers.

Tesco (LSE:TSCO) has taken a different approach by not making any adjustment, with £892 million of pandemic costs causing directors including new chief executive Ken Murphy to miss their annual bonus target on profitability.

The same approach was applied to a three-year performance share plan, which paid 23.1% of the maximum possible after earnings per share and cash flow measures were impacted.

Tesco's remuneration committee chair Steve Golsby said the matter had been the source of much debate and noted that the outcome was no reflection on the strong performance or “exemplary leadership response” to the unprecedented challenges.

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Murphy received total fixed pay of £629,000, with his base salary set to stay the same this year as Tesco continues to exercise restraint in light of the global pandemic. It received a trading boost from stockpiling at the start of the crisis as well as significant business rates relief, which it subsequently repaid.

With voting advisory firms Glass Lewis and Institutional Shareholder Services in support, the resolution on Tesco's remuneration report should get a smoother ride than the 67.3% of votes cast against at last year's AGM.

The shareholder dissent followed a decision by Tesco to exclude Ocado from the total shareholder return comparator group used to determine the 2017 long-term bonus.

A new three-year remuneration policy is also being proposed at this year's AGM, with the only changes from the previous document being a reduction in the maximum pension contribution for new executive directors and an extension to the shareholding requirement.

The meeting had been due to see a special shareholder vote on the company's approach to tackling the obesity crisis, but having pledged to boost sales of healthy food and drink, the resolution coordinated by ShareAction is no longer on the AGM agenda.

Tesco responded in March by committing to a major new programme of reformulation to improve the health profile of its products by 2025, which it later extended to its central European operations and wholesale supplier Booker.

The move represented a major triumph for ShareAction, which through a coalition of institutional investors with £140 billion of assets, filed what it believed was the first ever health-related special shareholder resolution directed at a food retailer.

ShareAction engagement manager Louisa Hodge said: “Investors are recognising the importance of health.

“They see the risks and opportunities supermarkets face, given their outsized role in shaping our diets. By filing a shareholder resolution, our investor coalition sent a strong message to Tesco and to other supermarkets that shifting sales toward healthier options is important.”

THG Holdings (Thursday 24th)

THG (LSE:THG) entrepreneur Matt Moulding's first AGM as the head of a stock market listed company, which owns Hut Group, will be behind closed doors after a late change of plan for the Manchester meeting.

Shareholders will now have to follow events online amid fears over the spread of the Delta variant of Covid-19 in the Greater Manchester area, where the company has its headquarters.

The ecommerce firm made its stock market debut in September, raising £920 million of capital in what was London's largest IPO in five years. Moulding has since reported a record and better-than-expected year of trading, as well as disclosed he is gifting £100 million of his shares to charity and making a donation to good causes in respect of his annual salary.

Moulding and his chief financial officer John Gallemore have pledged to do the same with this year's salaries of £750,000 and £450,000 respectively, along with annual bonuses.

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Lancashire-born Moulding owns about 25% of the business, which has thrived on the back of the high-margin e-commerce platform Ingenuity, and through online brands Lookfantastic and Myprotein in the fast-growing beauty and nutrition markets.

The founder's role as executive chairman and chief executive raised corporate governance concerns at the time of the IPO, but THG says his big shareholding means his interests are closely aligned with other owners in focusing on long-term success.

Since the IPO, the company has appointed two independent non-executive directors and four special advisers, exceeding the commitments made at the IPO. 

Voting advisory group Glass Lewis and Institutional Shareholders Services have recommended support for the key resolutions at the AGM, including the remuneration report.

Entain (Friday 25th)

Three different chief executives have been in charge of Ladbrokes owner Entain (LSE:ENT) in the year since its last AGM, when the FTSE 100 company was also known as GVC Holdings.

Kenny Alexander surprised investors last July with his departure after 13 years in charge, during which time he turned the small AIM-listed company into the international owner of brands including Eurobet, Foxy Bingo, bwin and Coral.

Shay Segev stepped up from chief operating officer before he was snapped up to run sports streaming service DAZN, with Jette Nygaard-Andersen his replacement after serving as a non-executive director since December 2019.

Her salary of £750,000 is an 11% increase on Segev's, with the £525,000 pay of new deputy chief executive Rob Wood representing a 21% rise due to his increased duties. Entain said the salary for Nygaard-Andersen reflected her extensive experience and knowledge of the company, as well as the competitive external market for talent.

The annual report also reveals executive directors waived their bonus entitlements for 2020 after a year in which the Covid-19 pandemic meant no dividend was paid to shareholders.

Alexander received pay and long-term shares worth £1.68 million for 2020 and is classed as a “good leaver” so that he is entitled to future awards, subject to clawback provisions.

Voting advisory groups Glass Lewis and Institutional Shareholder Services have recommended support for the company's remuneration report and other AGM resolutions.

Scottish Mortgage Investment Trust (Thursday 24th) 

Scottish Mortgage's (LSE:SMT) AGM follows the strongest ever year for the flagship Baillie Gifford investment trust, during which time the share price almost doubled for a market capitalisation of just over £18 billion.

Exposure to the electric and autonomous vehicle market was a big factor in the stunning growth, after a big surge in the valuations of Tesla (NASDAQ:TSLA) and China's NIO (NYSE:NIO). Other holdings include Netflix (NASDAQ:NFLX), Amazon.com (NASDAQ:AMZN), Alibaba (NYSE:BABA) and Moderna (NASDAQ:MRNA).

Shareholders won't be able to attend the Edinburgh AGM due to continuing Covid-19 restrictions, but it is still hoped that they will be able to hear from managers at a forum in September and other live events later in the year.

These will be among the last opportunities to hear from James Anderson, who will retire as a partner from Baillie Gifford and as joint manager of Scottish Mortgage on 30 April 2022.

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Over the last two decades he has led the transformation from a largely UK-focused trust to one that is now “global, long term and index indifferent” after pioneering Scottish Mortgage’s investments in private companies.

The AGM includes a resolution asking shareholders to approve the removal of the directors’ share qualification rule. Scottish Mortgage notes that, based on its financial year-end share price of 1,137p, any new director appointed at that time would have needed to purchase 5,000 shares at an aggregate cost of nearly £57,000 to satisfy the rule.