Sir Stuart Rose, the Marks & Spencer chairman, is forgoing a third of the shares awarded to him under the retailer's remuneration package in the latest victory for investors campaigning against excessive executive pay.
In an attempt to stave off a revolt at the company's annual general meeting next month, both Sir Stuart and Steve Sharp, the M&S finance director, are waiving their rights to a portion of the shares allocated under a three-year bonus plan M&S agreed in 2005.
The group's annual report earlier this month revealed that M&S directors could still earn bonuses of up to 45 per cent of their basic salaries even if the company failed to meet its profits targets. But "feedback from shareholder representative bodies" led to the decision to forgo part of the package, Sir Stuart said yesterday.
"I am committed to ensuring that M&S engages in full and constructive dialogue with our shareholders," he added. "The board of M&S is acutely aware of the governance issues we face and the importance of good shareholder relations. Our decision today reflects this."
Sir Stuart's compensation for the financial year to March shot up by 28 per cent to £1.77m, despite M&S's pre-tax profits falling by nearly 40 per cent and it having to slash its dividend by a third, the first such cut in nine years. The pay rise was linked to shares awarded in previous packages but not handed over until 2008, the report said.
This year's executive remuneration dispute is just the latest run-in between the M&S board and its shareholders. Last year's AGM was an equally controversial affair, with more than a fifth of shareholders voting against Sir Stuart in protest at his appointment as executive chairman. Critics claim the promotion contravenes governance issues by combining the chief executive and chairman roles, and despite attempts to lay the issue to rest it is likely to re-surface again this year.
In March, the Local Authority Pension Fund Forum – which holds up to 2 per cent of M&S stock – called for the appointment of an independent chairman by 2010, a year earlier than Sir Stuart's proposed departure in 2011. The aim is to allow shareholders to vote against the dual role without it being a vote of no confidence in Sir Stuart as chief executive during such difficult trading conditions. In the year to March, pre-tax profits dropped to £604m from £1bn the year before. And although the group's total sales rose by nearly 0.5 per cent to £9.1bn, like-for-like sales in the UK fell by 5.9 per cent.
M&S is just one of a string of big companies to have faced a backlash from shareholders over executive pay. Last month, 59 per cent of Royal Dutch Shell investors voted down the oil multinational's remuneration report and called for Sir Peter Job, the chairman of the remuneration committee, to step down. Even the oil giant's chief executive, Jeroen van der Veer, who is quitting this summer, later said he would neither have worked harder for 50 per cent more, nor less hard for 50 per cent less. Provident Financial and Bellway have also had plans rejected by angry investors. And alongside the few outright rejections, are a far higher number of near misses.
Earlier this month, nearly a quarter of investors in WPP, the global advertising group, failed to back a bonus scheme under which chief executive Martin Sorrell could net $95m (£58m) over the next five years. The plan came against a backdrop of 4,300 job cuts and WPP revenues tumbling 6.7 per cent.
Taylor Wimpey has also faced criticism from Pirc, the shareholder activist group, over the targets in its share scheme. And in May, 46 per cent of investors failed to support constulancy group Amec's plans for a 13 per cent pay rise for chief executive Samir Brikho, taking his total pay to £850,000.