Sage bosses pay vote to test City's temperature on reform

Watchdog Pirc thinks investors should vote down the remuneration report 

James Moore
Tuesday 21 February 2017 17:53 GMT
How serious is the City of London about reforming bosses pay?
How serious is the City of London about reforming bosses pay?

Seconds out, round one. Next week sees the annual general meeting of Sage Group, a company whose business is all about pay.

It provides accounting and payroll software, one of the less glamorous parts of the tech industry (the UK seems to do rather well with companies like this).

Which brings us neatly around to the pay its systems deliver to chief executive Stephen Kelly, and, especially, to finance director Steve Hare.

Now it won’t surprise you to learn that their pay is very high, with the company giving a single figure value for Mr Kelly’s package of £1.7m and of £3.1m for Mr Hare.

By the standards of the FTSE 100 those numbers aren't extreme, but that’s a reflection of how mad the awards handed to certain executives at the upper end of the scale have become and Pirc, a watchdog that advises pension funds and the like on how to cast their votes on our behalf, still thinks they are too big

Pirc argues that Mr Kelly’s salary is “in the upper quartile” when compared to a group of the company’s peers.

It puts the ratio of his package when compared to the average Sage worker at 36 to 1 which it describes as excessive (with good reason). It further takes issue with the shares gifted to Mr Hare. He got two awards back in 2014 which vest this year. One of them was to compensate him for shares in his previous employer that he lost through joining Sage.

The granting of such “golden handcuff” shares that you surrender when you leave your employer, only to get them back from your new shop as “compensation”, is nothing short of a racket from which shareholders derive no benefit whatsoever. A point Pirc, among others, has often made.

For all these reasons, Pirc thinks shareholders should oppose the remuneration report in the advisory poll that will be taken.

The result of that will make for interesting reading. As I’ve said, Pirc makes some valid criticisms of Sage’s remuneration report, but it’s not hard to find very much worse behaviour on the part of FTSE 100 companies.

Now, some of the big institutional investors have recently been making noise about how soaring pay handed to CEOs, and CFOs like Mr Hare, needs to be brought back to earth. They've promised to deploy their votes with that aim in mind.

That’s in no small part because they fear that the Government might be inclined to take action for them if they won’t act themselves.

The result of the vote on Sage’s report might give us some idea of how serious they are about changing the culture of excessive executive pay. It could provide an indication of whether they have recognised the need for reform across the board or whether they intend to concentrate their fire on one or two of the real bad boys in the hope that a token rebellion or two will take the heat off them.

As things stand, I’m betting on the latter. So Sage probably doesn’t have too much to worry about.

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