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Publishing company Pearson plc’s board is holding an EGM on Friday 18 September, to vote on its prospective CEO appointment of former Disney executive, Andy Bird. The appointment is contingent on a pay package worth £7.4m.
Whilst the remuneration policy received 95.12% of the votes in favour at this year’s AGM in April, the board’s proposition to permit the grant of a co-investment share award to Bird requires additional approval, triggering an EGM in line with section 226B(1)(b) of the Companies Act 2006, which will amend the director’s remuneration policy if approved.
Since the announcement, there has been significant investor revolt, portraying the pay package as a form of ‘blackmail.’ Bird joined the FTSE 100 company as a non-executive earlier this year. He had been interviewing several candidates for the chief executive's job to replace current CEO John Fallon when he was put forward for the role, conditional upon a pay package that included an annual base salary of £984,000, fixed until at least 2023, a potential annual bonus worth twice that amount, a substantial pension contribution, and a £189,000 allowance for an apartment in New York. Whilst these terms fall under the already approved remuneration policy, the package also included a co-investment award of up to $9.375m, in exchange for Bird buying $3.75m of Pearson shares. According to the circular, the co-investment award ‘will exceed the maximum annual face value that may be granted by way of a share award under the Remuneration Policy’ and therefore requires the approval of shareholders to grant the award under the Long Term Investment Plan.
Shareholder advisory groups ISS and Glass Lewis have expressed concerns over the payment plan. ISS stated that the proposed co-investment award was ‘significant in value’ and that the board had not ‘provided a compelling rationale for [it]’. ISS continued to say that ‘The employment of Andy Bird as CEO is presented as subject to the approval of this resolution, presenting shareholders with an all-or-nothing decision which is itself considered poor practice.’
Chair Sidney Taurel has defended the proposed appointment stating that ‘Andy brings a wealth of international consumer experience, as well as significant expertise in building brands, transformational change and driving digital innovation.’ Taurel also noted that ‘…he is extremely well placed to continue the transformation of Pearson, leading it to a new era of growth and enhancing value for all our shareholders’.
If Bird is voted in, he will be based in the US where most of the company’s revenue is generated, despite Pearson’s headquarters being in London. The resolution this Friday will be put to shareholders as an ordinary resolution which will require over 50% of votes to pass. However, the likelihood of Bird’s appointment is uncertain as many shareholders have already expressed their dissent for the proposal, with three top-20 shareholders expressing concerns.
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