SThree to review executives’ incentive plans after investor revolt
28 April 2014
International recruitment firm SThree is to review its long-term incentive plans for senior executives after it suffered a major investor revolt over executive remuneration.
Mon, 28 Apr 2014International recruitment firm SThree is to review its long-term incentive plans for senior executives after it suffered a major investor revolt over executive remuneration.
At last week’s annual general meeting (AGM), 49.4% of shareholders voted against the directors’ remuneration report.
In a statement released after the voting, SThree says: “We understand this reflects the concerns of a number of investors that the group's performance targets were insufficiently stretching. This process was followed as usual this year, but it became clear only in the immediate run up to the AGM that a number of investors who had not responded during the earlier consultation process held strong views on this point and, consequently, the true strength of investor feeling on this issue was not reflected during the earlier consultation.
SThree company secretary, Steve Hornbuckle, tells Recruiter that the company consulted with its shareholders in November and December last year, ahead of this year's AGM. However, he says that executive remuneration "didn't seem to be a major issue at the time" for investors, and only surfaced as a concern " a few days before the AGM".
Hornbuckle adds that there are two sides to the engagement process between a company and its investors, and that some "institutional investors struggled to come back to the company [with their concerns] in good time prior to the AGM".
Kean Marden, head of business services equity research, at Jefferies International, tells Recruiter that the SThree vote is part of a wider trend. “We are seeing more shareholder engagement and activism than five to 10 years ago,” he says.
SThree is not the first listed staffing company to experience opposition from shareholders over the remuneration of its top executives. In 2012, 17% of Michael Page International (now PageGroup) shareholders rejected the company's pay report at the company’s AGM. This led to a review of the company’s remuneration and reward policy, which recommended providing executives with longer-term incentives based on three-year performance horizons. These recommendations were subsequently approved at last year’s AGM.
Kean says that while the SThree’s remuneration report was narrowly voted through, in general “it’s a bad idea for companies to ignore substantial ‘no’ votes”.
And in the light of the vote, and discussions with many of the investors concerned, SThree says it “has committed to review the current long-term incentive plan earnings per share (LTIP EPS) performance targets (for LTIP awards made in early 2014) and will also be reviewing future years' EPS targets as part of its annual consultation later this year”.
A company spokesperson tells Recruiter that as a result of the company’s response to the vote, it doesn’t expect similar problems to arise at future AGMs.
SThree adds: "The company takes its responsibility to engage with investors on remuneration matters seriously and normally undertakes this process annually, at the start of each financial year (typically around October/ November), to give investors the opportunity to raise any concerns and, if necessary, for the company to reflect them in a revised remuneration policy/implementation well ahead of the AGM voting deadline.”
At last week’s annual general meeting (AGM), 49.4% of shareholders voted against the directors’ remuneration report.
In a statement released after the voting, SThree says: “We understand this reflects the concerns of a number of investors that the group's performance targets were insufficiently stretching. This process was followed as usual this year, but it became clear only in the immediate run up to the AGM that a number of investors who had not responded during the earlier consultation process held strong views on this point and, consequently, the true strength of investor feeling on this issue was not reflected during the earlier consultation.
SThree company secretary, Steve Hornbuckle, tells Recruiter that the company consulted with its shareholders in November and December last year, ahead of this year's AGM. However, he says that executive remuneration "didn't seem to be a major issue at the time" for investors, and only surfaced as a concern " a few days before the AGM".
Hornbuckle adds that there are two sides to the engagement process between a company and its investors, and that some "institutional investors struggled to come back to the company [with their concerns] in good time prior to the AGM".
Kean Marden, head of business services equity research, at Jefferies International, tells Recruiter that the SThree vote is part of a wider trend. “We are seeing more shareholder engagement and activism than five to 10 years ago,” he says.
SThree is not the first listed staffing company to experience opposition from shareholders over the remuneration of its top executives. In 2012, 17% of Michael Page International (now PageGroup) shareholders rejected the company's pay report at the company’s AGM. This led to a review of the company’s remuneration and reward policy, which recommended providing executives with longer-term incentives based on three-year performance horizons. These recommendations were subsequently approved at last year’s AGM.
Kean says that while the SThree’s remuneration report was narrowly voted through, in general “it’s a bad idea for companies to ignore substantial ‘no’ votes”.
And in the light of the vote, and discussions with many of the investors concerned, SThree says it “has committed to review the current long-term incentive plan earnings per share (LTIP EPS) performance targets (for LTIP awards made in early 2014) and will also be reviewing future years' EPS targets as part of its annual consultation later this year”.
A company spokesperson tells Recruiter that as a result of the company’s response to the vote, it doesn’t expect similar problems to arise at future AGMs.
SThree adds: "The company takes its responsibility to engage with investors on remuneration matters seriously and normally undertakes this process annually, at the start of each financial year (typically around October/ November), to give investors the opportunity to raise any concerns and, if necessary, for the company to reflect them in a revised remuneration policy/implementation well ahead of the AGM voting deadline.”
