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TMCNet:  Burberry shareholders revolt over Christopher Bailey's pay package

[July 11, 2014]

Burberry shareholders revolt over Christopher Bailey's pay package

(Guardian Web Via Acquire Media NewsEdge) Burberry has faced a huge revolt over pay with 52.7% of investors voting against the company's remuneration report after it handed the new chief executive Christopher Bailey a one-off award of shares worth nearly £15m last year.


Speaking afterwards, the Burberry chairman, Sir John Peace, said the vote against was "very disappointing".

"What we have to do is reflect on that and talk to shareholders," he said.

The vote on the remuneration report is non-binding but just over 16% of investors also voted against the company's remuneration policy at the company's annual general meeting in central London. Prior to the meeting a chorus of investor groups including Pirc and the Investment Management Association (IMA) flagged their concerns about the British fashion house's pay policies.

The 52% no vote is one of the biggest-ever protests staged by shareholders against boardroom pay. Insurer Aviva suffered a 60% vote against its pay (including abstentions) in 2012 to protest against a £2.2m golden hello for its incoming head of UK operations, resulting in the departure of its chief executive Andrew Moss.

In 2013, nearly 40% of investors failed to support a $4m (£2.5m) share award for the chief executive of mining company Randgold Resources. And in 2012, nearly one-third of shareholders declined to back Barclay's pay policy, including a £17m deal for its controversial then chairman Bob Diamond.

Bailey, who succeeded long-serving chief executive Angela Ahrendts in May, holds the title of chief creative and chief executive officer. The pay package for his enlarged role includes a £1.1m salary, annual cash bonus of up to twice salary as well as share awards worth up to four times salary. His contract also includes a £440,000 cash allowance. In addition the company handed Bailey 1m free shares last summer.

Pirc, which advised shareholders to vote against the company's remuneration policy, had cautioned that executive directors' incentive schemes were "excessive" as potential payouts could be as much as eight times base salary. The IMA, whose members manage £4.5tn of assets, issued an "amber top" alert over pay – its second most serious level of rebuke on corporate governance.

During the meeting, Peace explained that the share award was made to Bailey after a rival luxury goods company tried to poach him. "We are acutely aware that Christopher could command a much higher package outside the UK." The company has a history of rewarding its executives handsomely. Bailey's predecessor Ahrendts, who left to join Apple in May, was one of the highest paid chief executives in the FTSE 100. Indeed, the American smashed through the glass ceiling to become the first female to top Britain's executive pay league after she earned £16.9m in 2012. The near £17m package included bonuses, benefits and proceeds from the sale of bonus shares. In her final year in charge, Ahrendts took home more than £9m after being granted early access to share bonuses worth £6.2m and a cash bonus worth £2.1m.

Investors have accepted the pay situation as the management team have been incredibly successful - Ahrendts and Bailey worked side by side for eight years. Last year adjusted pretax profits rose 8% to £461m while sales increased 17% to £2.3bn.

Burberry argues that Bailey, who joined as design director in 2001, is vital to its success and that his pay is in line with other global luxury-goods companies. For example, Prada's Miuccia Prada reportedly earned £11.7m in 2013.

(c) 2014 Guardian Newspapers Limited.

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