Shareholders have called time over executive remuneration at the UK's biggest pub landlord Punch Taverns, protesting huge grants of shares to directors and bonus payments to directors despite Punch's dismal performance.
More than 55% of Punch’s shareholders voted against the remuneration report at Wednesday’s annual meeting. The main concern expressed by mutinous shareholders was the share awards aspect of Punch’s long-term incentive plan (LTIP). Critics argued that this alone can be worth up to 200% of salary.
For the last financial year, finance director Phil Dutton earned £465,000, but was awarded shares which could be worth close to £700,000. Giles Thorley, chief executive, was paid £681,000, but in recent years has enjoyed payouts of £30 million. Departing directors also got payoffs, including £652,000 for former commercial director Jonathan Paveley and £420,000 for pubs chief Deborah Kemp.
In a statement released after the meeting Punch said it "noted" the vote and now intended to conduct "a full review" of its pay policies including consultation with shareholders. "The policy of the remuneration committee is to ensure that remuneration is competitive, provides sufficient incentive to retain talented executives, rewards long-term performance and at the same time is aligned with shareholders' interests,” said the statement.
The company, which has debts of £3.5 biliion, lost £400 million last year and wrote £600 million from the value of its estate. Punch said trading since the start of the new financial year has “remained difficult”. Profits will be lower in the coming months, as the company sells off pubs to repay debt and the weak economy limits consumer spending. “Customers have less disposable income and if they do go out they want a really good experience,” said Thorley.
But Punch has problems other than the disposable income of its regulars. Rent concessions to tenants struggling to keep their pubs open have been costing the company £2 million a month. The figure is up from an average £1.6 million last year, and comes in the form of rent concessions and special product discount schemes.
The Association of British Insurers has issued a red flag warning about the company. Peter Montagnon, director of investment affairs at the ABI, said: “We red-topped the report on the size of the [share] grant and the payment of a bonus in a year in which the dividend was suspended. Companies must pay attention to their own performance and the economic climate when setting remuneration policy.”
Seymour Pierce analyst Hugh-Guy Lorriman commented: “The resistance to current remuneration shows that shareholders want action from management on trading and return to shareholders, and may reflect the new mix of (more active) shareholders post the summer rights issue, when the number of shares more than doubled.”