British Land attacked over incentive scheme

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The Independent Online
British Land's chairman, John Ritblat, will come under fire at the property company's annual meeting today over plans to hand free shares to directors as a reward for their long-term performance. The corporate governance lobby group Pirc is urging shareholders to oppose a proposed long-term incentive plan on the grounds that its targets are too easy to achieve.

According to Pirc, British Land's directors stand to be rewarded if the company merely matches the average capital growth in the property market rather than outperforming it. It also says the proposed scheme measures performance over too short a period and criticises the fact that British Land's directors do not have any of their own money at risk.

According to Estates Gazette, the property industry journal, Pirc has objected to the yardstick British Land has chosen to measure its performance. The incentive scheme compares the company's net asset value with the capital component of the Investment Property Databank's annual index. According to Pirc, this is not a fair comparison because the IPD index measures the value of property owned by unborrowed institutions. Like most property companies, British Land uses balance sheet gearing to leverage the return to its shareholders and should therefore expect to outperform ungeared funds.

According to Anne Simpson, Pirc's joint managing director: "We want the comparator to be something that is relevant and stringent."

Last month British Land announced a 14.3 per cent increase in net assets per share during the year to March. Profits rose even more strongly, by 47 per cent to pounds 91.2m, as it benefited from a spending spree that has seen 90 per cent of its pounds 5bn property portfolio acquired in the past eight years.

The company has rejected Pirc's criticisms, saying it consulted with the Association of British Insurers, the National Association of Pension Funds and its main shareholders before proposing the scheme.

Last year, Mr Ritblat received a bonus of pounds 1.8m and five other directors shared pounds 3.8m.

Moorfield Estates, another property company, last year came under fire for an incentive scheme which could have been worth eight times its directors' salaries if the company had outperformed the IPD capital value index over five years. The scheme was amended.

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