Your vote counts: will M&S and Sainsbury's avoid AGM trouble?

Shareholders in two of the country’s biggest retailers get their chance to put questions to management and vote on their generous pay policies.

JD Sports Fashion (LSE:JD.) has had a fractious relationship with shareholders in recent years, and another revolt against its generous pay policy has finally cost a director his job. 

Andrew Leslie, chairman of the Remuneration Committee and member of the Audit and Nomination Committees, was immediately kicked off the board after shareholders voted against his re-election at this year’s Annual General Meeting (AGM). 

Leslie’s removal is the culmination of growing shareholder dissent since he became chair of the remuneration committee seven year ago. Much of the anger has centred on big cash bonuses for senior management.

There has also been anger at executive chairman Peter Cowgill’s £4.3 million bonus in a year when the retail chain received substantial government support. That’s not considered to be in line with good practice, and neither is Cowgill’s dual role as chief executive and board chair. However, he appears to have drawn away some of that criticism with a promise to split the current role of executive chairman and CEO before the next AGM. 

While there were also significant votes against other resolutions linked to JD’s pay policy, they were all passed this time. 

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Looking ahead, there will be no trip to Wembley for Marks & Spencer (LSE:MKS) shareholders next week as Covid-19 restrictions mean the retailer's AGM will take place online for a second year in a row.

The Wembley conference centre hosted the event between 2013 and 2019, with London's Royal Festival Hall used prior to that in order to accommodate hundreds of shareholders.

Attendance on Tuesday will be strictly online, but M&S says it is looking forward to repeating the success of last year when its first ever digital AGM saw improved levels of engagement.

The M&S gathering is typically one of the highlights of the summer AGM season, with Land Securities and Sainsbury's among the other blue-chip events taking place next week. The supermarket faces a potentially tricky time after the voting advisory group Glass Lewis recommended shareholders cast their votes against the remuneration report. 

Morrisons and Whitbread have already suffered big revolts, with JD Sports Fashion the latest in the firing line after it paid significant bonuses to executive chairman Peter Cowgill during a year of Covid-19 support from the government.

Marks & Spencer (Tuesday, 6 July)

The retailer is to host another fully digital meeting after finding that nearly three times as many shareholders as usual engaged with last year's online 2020 AGM.

Until the pandemic, the retailer booked a big conference hall venue in London so that loyal shareholders could quiz management about everything from the company's financial performance to the poor availability of their favourite garments.

After Covid-19 restrictions prevented attendance in person at last year's AGM, the live coverage of the event online resulted in much greater involvement in terms of those watching the proceedings, voting or posting questions.

Chairman Archie Norman said many found the meeting more engaging, as well as convenient.

He said: “We are going to do the same again but do it even better. This is your chance as a shareholder not just to see what is happening at M&S but to hold the board to account and ask all the tough questions.

“We want to make this the biggest and best Marks & Spencer AGM ever and it's going to be really exciting.”

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This year's digital meeting is taking place under studio conditions at the company's Waterside House support centre and will include the involvement of ex-BBC editorial director and economics editor Kamal Ahmed as shareholder advocate.

His job will be to ensure as many questions as possible are put to the M&S board, including by grouping together those where the same topic is covered. Shareholders who still want to raise an issue in person had until today (Friday) to submit a video recording.

M&S got through more than 30 questions at last year's AGM, with topics spanning the company's commitment to healthier products and approach to plastic packaging through to the impact of Covid-19 on overseas suppliers.

One questioner wanted to know if M&S shareholders could expect priority delivery slots in the  Ocado joint venture and another if board members regularly wore M&S suits. The answers were no to the first and yes to the second, albeit in relation to their appearance at the AGM.

Shareholders had until 11am today (Friday) to register their proxy votes. 

Glass Lewis, the voting advisory group, has recommended a vote in favour of the company's remuneration report. It praised the company for keeping executive pay in line with the experience of shareholders and staff after no dividend was paid for a second year running and the share price fell sharply over the year.

Chief executive Steve Rowe received no annual bonus or pay rise for 2020/21 and his single figure remuneration came to just under £1.1 million, based on a salary of £834,000 and pension benefit of £203,000.

Sainsbury's (Friday, 9 July)

The pay of supermarket bosses during the pandemic will be under more scrutiny after Sainsbury's opted to apply some upward discretion to its remuneration for 2020/21.

Voting advisory group Glass Lewis says the impact was relatively modest but that it could not support the company's remuneration report in a year when the chain reported a bottom-line loss of £261 million and underlying profits fell 39.2% to £356 million.

Glass Lewis added: “We note that adjustments of this kind have been rare among the company's FTSE-listed peers, the majority of whom have not acted to apply upward adjustments to awards when targets have been missed.”

Some discretion was used on determining the annual bonus, where profitability accounts for 50% of the overall pay-out. If exceptional Covid-19 costs were stripped out it would have led to a maximum pay-out, but the committee said this was not appropriate because Sainsbury's also received some benefit from stockpiling and other Covid-19 lockdown factors.

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In order to better reflect the underlying performance of the business and the shareholder experience it determined that a profit pay-out of 25% out of a possible 50% should be paid.

As it turned out, Simon Roberts declared last June when he became chief executive that he would waive his bonus entitlement for 2020/21. He was appointed on a salary of £875,000, which is over 10% lower than predecessor Mike Coupe’s salary at his retirement. 

Finance boss Kevin O'Byrne, meanwhile, volunteered to take the whole of his bonus in deferred shares, which will vest after two years in order to align interests with those of shareholders. His total pay package came to £2.3 million, including performance-related pay for 2019/20. 

Upward discretion was also applied to long-term incentive awards, which were granted in 2018 and scheduled to vest at 50% of their total. However, the committee increased the vesting outcome to 60% by using an 'on-target' underlying profit figure in their calculations.

In making these decisions, Sainsbury's noted that it made two thank you payments to staff in March and October 2020 benefiting around 140,000 hourly-paid workers and 12,000 managers.

A further special recognition payment was made to all hourly-paid staff in May this year, equivalent to 3% of annual salary. Together these three payments totalled over £800 for full-time staff.

For shareholders, they are due to receive a final dividend of 7.4p a share worth a total of £164 million on 16 July and have also seen shares rise 50% since last September.

Last month, supermarket chain Morrisons 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.