The owner of the catalogue giant Argos has become the latest UK company to suffer a bloody nose at the hands of shareholders, as a growing legion of investors vote against lucrative remuneration policies during the recession.
More than 40 per cent of shareholders of Home Retail Group (HRG), which also owns the DIY chain Homebase, failed to back its remuneration report at its annual meeting. Of the total votes cast, 33 per cent voted against the report, more than 7 per cent abstained and 60 per cent voted in favour, as shareholders rebelled against a new bonus scheme for HRG directors that could reward them with up to 150 per cent of their base salary in cash.
Last week, the Association of British Insurers issued a "red top" alert on the HRG scheme. Peter Montagnon, the director of investment affairs at ABI, said: "The main objection of investors was with the scope and timing of the changes, which shows that remuneration committees should take more care when designing packages to avoid opportunistic increments."
HRG is the latest in a series of rebellions by UK shareholders furious at what they perceive to be excessive rewards schemes, often at companies where performance has stuttered over the past year. In recent months, the oil giant Royal Dutch Shell, the global advertising company WPP and the fashion retailer Next have suffered protest votes at their AGMs.
An ABI spokesman said: "The mood has become tougher. This always happens in a downturn and, to some extent, this is a healthy correction to restore real focus on performance. As both shareholders and boards look to raise their game, it is clear that nothing can substitute high-quality, open dialogue."
For the year to 28 February, Home Retail made a pre-tax loss of £394.2m, after writing down the value of its Homebase DIY chain by £651.2m. Like-for-like sales at Homebase tumbled by 10.2 per cent and fell by 4.8 per cent at Argos.
At the AGM on Wednesday, more than two-fifths of shareholders refused to back HRG's decision to replace a co-investment plan in 2009/10 with a deferred bonus in shares, which will pay 25 per cent of bonus opportunity, equal to 37.5 per cent of base salary, for hitting a benchmark pre-tax profit and group net cash target. When board members "very substantially exceed" targets, the new plan will offer them a maximum bonus, deferred in shares, of 150 per cent of base salary.
While Terry Duddy, the chief executive of HRG, received a total package of £858,000 for the year to 28 February 2009, he and his fellow directors did not get a bonus. In 2007/08, Mr Duddy pocketed £1.77m after picking up a bonus of £920,000.
An HRG spokesman said that last year it had consulted with its major shareholders and adjusted its proposals to provide a "better balanced package of incentives". He added: "We are pleased that the majority of those shareholders who voted, including our largest shareholders, have supported these changes. However, the committee has taken note of the comments made by those shareholders who have expressed concern and will take these views into account in the ongoing monitoring of the effectiveness of the group's incentive arrangements."
HRG said the new bonus scheme will vest subject to satisfactory company performance.
One of the biggest rebellions this year took place at Royal Dutch Shell's AGM in May, when 59 per cent of investors voted down the oil multinational's remuneration report and called for Sir Peter Job, chairman of the remuneration committee, to step down.Reuse content