This week sees a series of annual meetings where executive pay deals once again make the headlines. Several years of shareholder anger has pushed remuneration committees to tie executive pay to performance in the hope that this would keep salaries from being excessive
However, chief executive of advertising giant WPP (LSE: WPP) Sir Martin Sorrell is in line for a record-breaking £30 million payout — a 70% increase on his previous year’s paycheck.
Sorrell has been the highest-paid chief executive in the FTSE 100 for the last three years, but WPP is keen to point out that most of Sorrell’s pay, almost £23 million, came in long-term bonuses that paid out after five years of rising profits. A WPP spokesman said:
“The remuneration committee was at pains two years ago to consult shareholders fully in order to align executive rewards with the performance of the company. WPP was the seventh-best performer in the FTSE 100 in terms of total shareholder return for the five-year period ending December 2013.”
RBS bypasses the EU bonus cap
Meanwhile over at RBS‘s (LSE: RBS) annual meeting, the UK government — as majority shareholder — nodded through remuneration resolutions, having previously forced the state-owned bank to scrap plans to pay its bankers bonuses twice the size of their salaries.
From 2014, executives will get up to 400% of salary through share allowances. Other allowances such as housing and travel are also making a bigger appearance in pay awards as these incentives circumvent new EU rules, which stipulate that bonuses are capped at 100% of annual pay.
Commenting on pay deals Chairman Sir Philip Hampton replied that “overall bonuses had come down by 60% in the last four years, and by 75% in investment banking alone. I don’t think it’s ‘job done’ yet, but huge progress has been made”.
Overall investors were not impressed by the pace of progress and shares of RBS have traded lower at £3.21.37 today.
Tesco’s next in the spotlight
The Tesco (LSE: TSCO) AGM on Friday is also set to be a tense affair as it has a history of shareholder revolt over excess pay to its executives as far back as 2010 when 47% of shareholders voted against its boardroom pay policy. In a bid to avoid further embarrassing shareholder revolt, the retailer has overhauled its pay policy.
Philip Clarke, Tesco’s chief executive, has overseen three years of falling sales in the UK. The supermarket reported a 3.7% revenue slide earlier this month — its worst quarterly figures for 40 years, which meant there was no cash bonus or share award for the executive team. Mr Clarke, last year, received a £1.1m salary and £57,000 in benefits.
On Monday, Fitch cut Tesco’s credit rating from BBB+ to BBB, citing increasing competition from discount retailers. It followed a downgrade from Moody’s after a 6% drop in the company’s 2013-14 trading profit and weak first quarter sales this year.
