ShareSoc Advises Investors to Vote Against Berkeley Remuneration Report

PRESS RELEASE 82 23/08/2016

ShareSoc (the UK Individual Shareholders Society) is advising its Members to vote against the Remuneration Report resolution at the forthcoming Annual General Meeting of Berkeley Group Holdings Plc. ShareSoc considers:

– The 2011 LTIP plan total payouts are likely to be more than £400 million and are excessive. The plan dilutes shareholders by 14%, even though awards were made towards the bottom of the cycle. The dilution should have been half of what was agreed. This is an unnecessary transfer of wealth from shareholders to management.

– The remuneration of the Chairman Tony Pidgley is unnecessarily high (£21 million in 2015/16 and £23 million in 2014/15, plus the potential of a further £100 million). The main reason for the high pay is the excessively generous 2011 LTIP scheme, of which he receives 30% of the total pot.

– The combination of separate Executive Chairman and Chief Executive roles is unnecessary. In total their salaries are £600,000 higher than a more normal combination of a non-executive Chairman and CEO. The Chairman also receives a bonus and pension – so making his annual remuneration in the range of £2 million to £4 million p.a., whereas the going rate for a non-executive Chairman is £130k to £250k.

– Shareholders should vote against the remuneration report, as this will send a good signal of disapproval of this plan and the need for more moderation in the future.

Berkeley has performed well in recent years. Its share price was £8, when it introduced its LTIP in 2011, and was £24.90 when this note was written. But the 2011 LTIP plan total payout is likely to be more than £400 million and is considered excessive. The plan was approved by shareholders in 2011 and it may be considered too late to do anything about that decision, except to highlight that at the time this cyclical business was towards the bottom of the cycle. Shareholders who supported the plan should have examined it more carefully and should have seen the large potential dilution that will result.

Cliff Weight, ShareSoc spokesman on remuneration issues, said “I think the Berkeley Remuneration Report fails the ShareSoc Remuneration Guidelines test of Clarity and Transparency. Rather than giving a balanced report to shareholders, the report reads more like a marketing brochure emphasizing the positives and omitting the negatives. The key things the annual statement from the Chairman of the Rem Com fails to mention are firstly the size of the 2011 LTIP total payouts and potential payouts (of over £400 million) that will significantly reduce shareholders’ returns. In addition it fails to mention that Executive Chairman Tony Pidgley:

– Has skin in the game – he owns £160 million worth of shares and has options over 5 million shares that I estimate are currently worth over £100 million.

– Was paid £21.5 million last year and £23 million the previous year 2014/15.

– Received a £25,000 salary increase (3%).

– Has an annual bonus potential of 300% of salary.

– Receives pension cash allowance of 17% of salary, even though he is 69.”

Weight continued “This is yet another example of remuneration creep. ShareSoc is opposed to unnecessary increases in directors’ remuneration. Given his huge equity incentives, I am surprised Mr. Pidgley was given an increase in salary. I doubt this will motivate or help to retain him, so it could be considered as a waste of shareholders’ money and may attract unnecessary media attention.”

Another issue is the combination of Executive Chairman and Chief Executive. Most companies with an Executive Chairman do not have a CEO as well. If we look at the cost of employment of the combination of the two roles, it becomes apparent that the combination of Executive Chairman and a Chief Executive is unnecessary. In total, their salaries are £600,000 higher than a more normal combination of a non-executive Chairman and CEO. The Chairman also receives a bonus and pension – so making his annual remuneration in the range of £2 million to £4 million p.a., whereas the going rate for a non-executive Chairman is £130k to £250k.

For further information, please contact:

Roger Lawson

Deputy Chairman, ShareSoc

Telephone: 020-8295-0378

Or:

Cliff Weight, Director and Remuneration Spokesman, ShareSoc

Telehone: 01737-202075

Post Date: August 23, 2016

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ShareSoc Advises Investors to Vote Against Berkeley Remuneration Report

PRESS RELEASE 82 23/08/2016

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