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JD Sports Fashion plc, for the second-year running, has seen yet another significant no vote with almost a third of votes against its remuneration report at this year’s annual general meeting (AGM), held on 31 July 2020. The remuneration policy and the long term incentive plan (LTIP), also received a significant no vote with 32.52% and 29.68% respectively. This year, the remuneration policy was put to a vote following its three-year review, the main changes being a more diverse method of calculating LTIP, the introduction of 250% of base salary cap for LTIP payments and the introduction of an executive level pension contribution cap at 8% of base salary.
Last year’s AGM result also drew attention to a special bonus paid out to executive chairman, Peter Cowgill, which received 19% opposition. This bonus was paid again in 2020, having increased to £1,726,000 from the £1,700,000 received the previous year. In addition, chief financial officer, Neil Greenhalgh, received an increased bonus payment from £56,000 to £300,000. According to the annual report, Cowgill merited the bonus due to ‘his leadership of the business in again achieving record results for the Company’. However, the bonus payments come as a surprise after a difficult and eventful financial year in which Cowgill sold £13.3m worth of shares, the company experienced a subsequent drop of 8% in share price, found its subsidiary Go Outdoors put into administration and later bought it back following pandemic-related financial struggles, and was forced to sell its recent acquisition Footasylum following a high profile investigation by the Competition and Markets Authority.
The annual High Pay report, which looked at company responses to COVID-19 in relation to remuneration, stated ‘The measures that have been taken range from temporary deferral of salaries (meaning that executives could still eventually be paid in full) to the reduction of salaries and the cancellation of bonuses.’ The report noted that out of the 36 FTSE 100 companies which made cuts to their executive pay, eleven also cut short-term incentive plans, such as bonuses. However, none of these 36 companies cancelled their LTIP.
In JD’s case, the FTSE 100 company implemented temporary reductions in salary and fees of at least 30% for members of the board and a voluntary reduction of 75% for Cowgill. The company stated that this ‘will be kept under review during 2020 and will only be reversed when the Board are satisfied it is in a position to do so’. Neither bonuses nor the LTIP were cut. Instead, the company commented that ‘incentive payments due following the year ended 1 February 2020 would be deferred and… made once our stores have re-opened and when the Board and Committee are satisfied that performance and projected cashflows of the Group permit payment.’ It also stated that ‘From 2020/21 onwards, under the proposed policy, the normal maximum bonus will be increased to 200% of salary to reflect typical market practice for companies of a similar size and complexity to the Group’
The board stated in its AGM results that together with the remuneration committee it had spent a ‘significant amount of time during the course of the year engaging with its shareholders both during the process of preparing the remuneration report and policy and in the run up to the AGM.’ The company also claimed to have specifically instructed PwC to assist with a revised remuneration policy and Executive LTIP structure. However, following a consecutive year of investor backlash, shareholders will be looking to the board to effectively address the significant dissent.
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