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Shareholders may have been
physically absent from WM Morrison’s virtual AGM held on 11 June 2020, but
their voices were heard when 34.83% voted against the proposed director’s’
remuneration policy. Despite the board’s statement that they had engaged with
several major shareholders as part of the renewal process, it is likely that
this significant opposition can be attributed to the pension contributions of
24% of base salary to chief executive, David Pott and chief operating officer,
The result may have been influenced
by input from the Investment Association (IA) and investor advisory group, ISS.
The IA have stated that ‘companies with existing directors who are paid more
than 25% of salary as a pension contribution will be given a ‘red top’’.
This means that the two executive directors have just made the cut. In
addition, Provision 38 of the UK Corporate Governance Code 2018 (UKCG Code 2018) states that ‘the pension contribution rates for
executive directors, or payments in lieu, should be aligned with those
available to the workforce,’ which certainly isn’t the case for Pott and Strain, with the shopworkers
on a 5% pension supplement of their base salary.
The company last experienced high
levels of opposition in relation to remuneration at its 2017 AGM, when its
remuneration report received a 48.11% significant no vote. This was later acknowledged
in its 2017/18 Annual Report by chair, Andrew Higginson, who stated that the board
did ‘not expressly state,
in accordance with the Code, the actions [Morrisons] intended to take to
understand the reasons behind the vote result’.
The AGM result in 2017 was followed
by the appointment of Tony van Kralingen as chair of the remuneration
committee, who led an engagement with shareholders to understand the reasons
behind the significant no vote. The remuneration report received increasing
support in votes at the subsequent AGMs (with 97.21% of votes in favour at the
2020 AGM). However, in March 2020, van Kralingen resigned alongside fellow non-executive
director, Neil Davidson, a move rumoured to have been the result of
disagreements over pay, pensions and corporate governance.
The 2017 AGM was also the last time
that Morrisons shareholders saw the remuneration policy put to the vote. At a
time when Pott and Strain received a pension supplement of 25% and 24% of their
base salary respectively, this resolution passed comfortably with 92.35% of
votes. Since then, amendments to the UKCG Code 2018 and the IA deadline to
align director’s’ pensions to that of the workforce by 2022 have had an impact
on shareholder sentiment. Fast forward three years and despite a drop of 1% to
Pott’s pension contribution, this is now a point of contention.
Morrison stated in its 2020 AGM
results announcement that, whilst ‘delighted’ by the 97.21% votes in
favour of the director’s' remuneration report, it ‘notes the number of votes
opposing’ the director’s’ remuneration policy. The FTSE 100 company now has
six months from the date of the AGM to submit its plans addressing this year’s
significant no vote against the remuneration policy to the IA public register.
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