Executive pay stays in the spotlight as Pearson, Rolls-Royce and Reckitt Benckiser brace for annual general meetings

Rebecca Smith
Rolls-Royce announced a record loss in February
Rolls-Royce announced a record loss in February (Source: Getty)

Pearson, Rolls-Royce and Reckitt Benckiser are the latest firms to face the hot seat over executive pay, with all three holding annual general meetings (AGMs) this week.

Pearson is in the spotlight, as the education firm gave chief executive John Fallon a 20 per cent pay rise for 2016, to £1.5m, despite the company’s £2.6bn loss.

Read more: Here's why Pearson shares are tanking

Advisers on voting at shareholder meetings, Institutional Shareholder Services and Glass Lewis, have encouraged clients to reject Pearson’s remuneration report at the firm’s upcoming AGM on Friday. Glass Lewis said in a report ahead of the meeting that it remained concerned by "the disconnect between bonus payouts and the financial performance".

Meanwhile, Rolls-Royce’s intention to up its bosses’ bonuses to retain top talent could face a frosty reception from shareholders in its AGM on Thursday, though the firm said it has consulted with major investors on its plans.

The engineering giant, which is in the midst of a turnaround plan led by chief executive Warren East, posted a record annual loss of £4.6bn in February.

Advisory firm PIRC has advised shareholders to oppose the pay plans. The Telegraph reported PIRC said the increases were "not acceptable as the previous award limit was already excessive".

Shareholder advisory group ISS noted increases in remuneration were "not palatable against the current backdrop", but approved the rises coming through longer-term bonuses, as opposed to basic salary.

Reckitt Benckiser, which holds its AGM on Thursday, has already attempted to see off a shareholder revolt by cutting chief executive Rakesh Kapoor’s pay by more than a third to £14.6m last year. Kapoor’s long-term incentive benefits were also pruned by 50 per cent in March.

The manufacturer of Nurofen posted underwhelming figures last month that missed analyst estimates.

Some of Britain's biggest companies have been braced for stormy AGMs recently, with drug firm AstraZeneca facing a significant shareholder protest on pay last week as nearly 40 per cent voted against the firm’s executive pay packets.

There has also been a backlash over Credit Suisse. Its pay report was approved by just 58 per cent of shareholders, after the bank proposed hefty bonuses for execs, in spite of large losses last year.

Schroders survived a potential scare last week, with shareholders backing the fund manager’s executive pay.

Read more: Corporate governance experts slam executive pay ahead of shareholder votes

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