30th Jun 2014 07:59
LONDON (Alliance News) - FirstGroup PLC is set to face a backlash from investors over its annual remuneration report, led by Sandell Asset Management Corp., which said Monday that it intends to vote against the report due to concerns regarding corporate governance practices at the transportation company.
In a letter to FirstGroup's Chairman John McFarlane, Sandell Asset Management - which has an interest of approximately 3.1% in the company - said it will also encourage other shareholders to vote against FirstGroup's annual remuneration report, citing CEO pay and poor sector expertise as drivers behind this.
Sandell's letter noted that FirstGroup's CEO remuneration package has risen 209% over the past five years and that Tim O'Toole is the highest paid CEO amongst his peers. However, during this five year period FirstGroup shares are the worst performing shares in its peer group, having returned -8% compared to +231% for its peers, an underperformance of 239%, said Sandell.
Chief Executive Officer of Sandell Asset Management, Tom Sandell said, "We are strong believers in pay for performance. We simply do not believe that a 94% rise in remuneration package is deserved for Mr. O'Toole's 2013/14 performance."
"In fact, the Executive Annual Bonus Plan appears to have been subverted by deficient targets, and has allowed the executive directors to earn a bonus every year despite significant underperformance. The fact that these targets are not fully disclosed to shareholders only increases our concern regarding the lack of transparency," said the company.
The asset manager acknowledged FirstGroup's recent board reshuffle, though said that "If sector expertise had been available on the Board, we believe a number of poor strategic decisions taken over the past few years could have been avoided," and that it remains concerned over sector expertise, specifically relating to the First Student and First Transit divisions.
Accordingly, Sandell intends to vote against the remuneration report at FirstGroup's annual general meeting and pledged to encourage other shareholders to do likewise.
Shares in FirstGroup were trading marginally lower shortly after the market open Monday, down 0.23% at 129.8 pence per share.
By Alice Attwood; [email protected]; @AliceAtAlliance
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