Given the much anticipated AGM season ahead, Willis Towers Watson will be issuing weekly updates throughout the peak of the season activity to help keep you in the know.
Each update will seek to capture the most interesting examples of change in the FTSE 150 over the past week. To get us started however, this first update in the series has reviewed companies publishing since 1 March 2017.
Our focus will be on three broad themes – quantum, simplification of pay design and investor/media activism.
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- Unilever and Standard Life both exercised discretion to reduce incentive payouts in light of broader economic performance (on bonus and LTIP respectively).
- Standard Chartered completed a period of transition flagged in previous annual reports and within previously approved policy. Short-term bonus opportunity increased from 40% to 80% of fixed remuneration with a corresponding reduction in LTI opportunity from 160% to 120% of fixed remuneration.
- Anglo American reduced the maximum annual LTI opportunity for the CEO from 350% to 300% of salary and introduced a cap on LTI payouts stating that “using the share price at the time of vesting, final amounts will be limited to twice the face value of the award at grant”. Committee has discretion in exceptional circumstances to exceed this level.
Simplification of pay design
- RELX simplified from three LTI vehicles (options, bonus share matching plan and performance share plan) to one (a performance share plan). Overall remuneration was kept broadly at current levels by offsetting the elimination of the two LTI vehicles (options, bonus share matching plan) by:
- Adding a 3-year deferred share element equal to 50% of salary at target (67% of salary at max) to the existing cash annual incentive plan. The existing cash portion of the annual incentive opportunity will remain at 100% at target but be reduced to 133% at max (from 150%).
- Adjusting the maximum under the existing performance share plan to 450% (from 250%) for the CEO and to 375% (from 200%) for other Executive Directors.
- Unilever intends to make its co-investment plan (MCIP) its only LTI plan going forward (formerly there was a co-investment plan and a performance share plan). They will do this in two phases:
- In 2017: lengthen the performance period of the co-investment plan to four years; increase shareholding guidelines to 5X for the CEO ; introduce two year holding period on performance share plan.
- In 2018: Discontinue use of performance share plan and simplify fixed pay into one value while maintaining target levels. They will consult on how this will be done.
- AstraZeneca simplified pay programmes by removing one of their two performance share plans (the AstraZeneca Incentive Plan or ‘AZIP’ focused on dividend yield). All quantum was shifted (on a neutral basis) to their more traditional performance share plan. Threshold level of vesting on the plan was also reduced (from 25% to 20%).
Investor / media activism
- BAE Systems occupied the front cover of the Times with criticism over quantum of the pay package to be offered to its incoming CEO (note: proposed package disclosed a lower salary and equivalent incentives to the current CEO). Learn more
- Sports Direct said it would start the process of allowing employee representation at the Board level. Learn more