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Surprises on Remuneration at the Kentz AGM, and opposition also at Hiscox

Surprises on Remuneration at the Kentz AGM,  and opposition also at Hiscox

Last week (on Friday the 16th May), both the Remuneration Policy and Remuneration Report resolutions were voted down by shareholders at the Kentz Annual General Meeting. This is one of the few companies where such resolutions have been lost in the current AGM round and the first where the Remuneration Policy vote has been defeated. That vote was only introduced in the last year by new Government legislation, but oddly enough Kentz was one of the few UK fully listed companies who did not legally have to hold one as they are registered in Jersey. So at least they appear to be trying to adhere to good UK corporate governance practice.

Even more difficult is trying to understand why there was so much opposition to these resolutions. The total remuneration of the CEO, Christian Brown, was certainly a large figure last year (at $3.6m), but it only rose by 1.3% over the prior year when earnings per share rose by 17.3%. Otherwise it looks the typical package of high base and aggressive bonus/LTIP packages common in large public companies.  Base salary of the CEO is proposed to be $803,400 in 2014, only up by 3% over 2013 although he did get a 38% rise last year.

Needless to point out that no institutions turned up at the AGM to explain why they voted against, and only 3 individual shareholders attended. Perhaps it was the 9.00 a.m. start time that put them off. This did get some negative comment from investors, but was put down to the CEO having a commitment in the USA later in the day.

Last year the company hastily withdrew resolutions on LTIP awards and share options before they were put to the AGM as it was clear there were going to be substantial votes against, so this is not the first time that the company has failed to line up its major shareholders properly in advance of the meeting. After this years AGM the company issued an announcement saying they had begun consultation with the shareholders to “determine how these concerns can best be overcome”.

A full report on the Kentz AGM is here.

Another company that does not legally require a Remuneration Policy vote is insurer Hiscox who are registered in Bermuda, but they also included a vote on Policy at their AGM on the 15th May. They managed to get 42% of votes opposed to the Remuneration Policy resolution but got 97% in favour of the Remuneration Report resolution. Manifest, a proxy voting advisory service, apparently were concerned about the lack of bonus caps, lack of clawback arrangements and other issues.  Unlike Kentz they made no announcement after their AGM about consulting further with shareholders on Remuneration Policy.

Comment: these votes suggest that the directors of both companies need to try harder. In other words, they need to spend more effort ensuring that their proposals on remuneration are both understand and are acceptable to the vast majority of shareholders.

Roger Lawson

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