Fashion house Burberry was dealt a blow at its AGM as 52 percent of shareholders voted not to support chief executive Christopher Bailey’s pay package, worth up to £10 mn ($17 mn) a year.
While high executive pay has been in the spotlight for some time, a majority vote against a remuneration policy remains rare. Sir John Peace, Burberry chairman, called the non-binding vote disappointing but noted that ‘after another strong trading update in which retail sales were up by 17 percent, we are pleased shareholders have voted in favor of all binding votes on our remuneration policy, share plans and board appointments.
‘[But] it is disappointing that the advisory vote for this year’s remuneration report did not have the same level of support,’ he said.
While Bailey’s pay package might have fallen foul of shareholders, his appointment in May received a resounding approval, garnering support from 99 percent of voters. Burberry’s overall pay policy was also backed by 84 percent of shareholders at the AGM.
In addition to his £1.1 mn salary, Bailey receives an annual allowance of £440,000. He was also given 500,000 shares in the company when he was appointed CEO that are now worth more than £7 mn.
The company’s former chief creative officer – widely credited with turning around Burberry’s fortunes – replaced Angela Ahrendts, who moved to Apple earlier this year.
Speaking to reporters after the AGM, Peace said that while the company acknowledged Bailey’s pay was ‘a lot of money’, it was necessary to keep him at the company. Bailey had been offered a higher salary elsewhere last year, Peace said, adding that Burberry is ‘acutely aware he could command a much higher package outside of the UK.’
Peace further pointed out that ‘much of [Bailey’s salary] is performance-related – which he will receive only if Burberry performs strongly. This will, of course, also benefit shareholders.’
Shareholders are concerned, however, about 1.35 mn shares Bailey was given before becoming chief executive. These shares would be worth £19.5 mn at today’s value, though he is not allowed to sell them for several years. Crucially for shareholders, however, these shares have no performance criteria attached to them.
Both Pensions & Investment Research Consultants (PIRC) and the Investment Management Association (IMA) had advised against Burberry’s pay policy. PIRC advised its members, which hold more than £1.5 tn in assets, against the package while the IMA issued an ‘amber’ warning about the company’s remuneration policy – the second most serious alert the body, which represents the investment management industry, can issue.
