A string of listed companies are expected to back down on executive pay under the weight of mounting pressure from shareholders, or face a bloody nose from investors this AGM season.
Analysts and campaigners believe many companies are improving their relations with investors, and taking measures to avoid future rebellions. But those who have not heeded warnings will face intense opposition from investors.
Crest Nicholson's shareholders have rebelled against the housebuilder's executive pay plans.
Fifty-eight per cent of the investors voted against Crest Nicholson's remuneration report at the company's annual general meeting (AGM) today, a fight-back the company described as "disappointing".
The vote, which is non-binding, came after a recommendation by influential shareholder advice group ISS.
The group urged shareholders to oppose directors' pay over worries that Crest Nicholson's profit targets were too easy to meet.
On publishing the results of its AGM, Crest Nicholson said: "We are disappointed the advisory vote for this year's remuneration report was not carried.
"As stated previously, the board expects the rate of profit growth will remain robust but not at levels seen in recent years due to tough comparators, additional investment in land, examining approaches to offsite manufacture and a new division required to support our stretching annual growth targets of 4,000 new homes and £1.4 billion of sales by 2019."
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Crest Nicholson's chief executive, Stephen Stone, is set to pocket £812,000 as part of a share bonus, adding to his salary of £541,158. Last year, Stone's take-home pay came to £2.2m when the firm's profits hit £195m.
Chief operating officer Patrick Bergen will enjoy £541,158 on top of his £375,000 basic salary, and Robert Allen, the housebuilder's finance chief, is in line for a £975,000 bonus and a £325,000 salary.
At the AGM, chairman William Rucker told investors that the company had achieved "landmark" sales of £1bn, a 90 per cent jump from the sales achieved in 2013.
Land investment has been strong, with replenishment levels increasing to seed an additional operating division in the Midlands, following the successful launch of our new Chiltern division in 2015. Crest Nicholson is also engaged with key partners in examining approaches to off-site manufacture, to further support the delivery capacity of the business.
Executive pay in spotlight again
Hargreaves Lansdown’s Laith Khalaf said: “[Executive pay] is in the spotlight again this spring. I expect we’ll have quite a lot of noise about this.”
Sharesoc’s Roger Lawson said: “There are lots of companies where there are still major problems. Rolls-Royce is one. The company is in dire difficulties and yet the CEO seems to achieve 55 per cent of his maximum bonus.”
However, Aberdeen Asset Management’s head of corporate governance Paul Lee said: “I think it is really hard to predict this voting season because what we are seeing is a lot of companies actually stepping back from their plans and their proposals.
“The resolutions that actually go forward in many cases, I imagine, will be supported. I’m afraid that might look like shareholders have wimped out and backed down but actually it’s a mark of success.”
He said this year there had been “frankly a remarkable level of dialogue between shareholders and companies”.
This year marks the first time many companies have had to put their pay policies up for shareholder approval since a binding vote on policies passed into law. This vote is a powerful tool which allows investors to hold companies to account on what they pay their senior executives over three years.
Investment Association boss Chris Cummings warned in a recent opinion piece: “As the starting gun is fired on this year’s AGM season, businesses around the UK would do well to heed the lessons from Brexit. Too many people still feel they are not sharing in this country’s prosperity. Companies can either act responsibly now and shape a more responsible 21st-century corporate Britain or they can carry on as before and have it foisted upon them.