28th Apr 2016 18:50
LONDON (Alliance News) - Industrial valve and pumps maker Weir Group PLC on Thursday faced the most significant investor revolt of any UK-listed company so far in 2016 as 72% of its shareholders voted to reject its remuneration policy.
The rejection came as Weir said trading in the first quarter was slightly ahead of its expectations, boosted by cost cutting and a resilient performance from its minerals arm.
Weir said 72% of shareholders voted against its remuneration policy, with the same proportion also voting against amendments to its long-term incentive plan rules. As a result, both resolutions failed to pass.
Chairman Charles Berry, following the annual general meeting, said the policy proposed "would have offered senior management greater "would have offered senior management greater stability through the introduction of restricted stock awards in return for a substantial reduction in the maximum award available to the most senior executive director from 250% of salary to 165%."
Berry said restricted stock awards closely align incentives for senior management to shareholder interests as the value is based on the performance of the company's share price. In addition, the company's Remuneration Committee would be able to claw back restricted awards if necessary.
"The policy was designed to ensure fairness and consistency across senior management levels and followed extensive consultation with shareholders, who held a wide range of views," Berry said.
Berry said shareholders had acknowledged the issues facing Weir on how to recruit, retain and incentivise senior management teams amid difficult market conditions.
But, Berry said, shareholders were "clearly uncomfortable" with a "new approach which did not follow standard UK practice". However, Berry said, citing a recent report by the Investment Association's Executive Remuneration Working Group, standard practice may not be sufficiently flexible and companies should be allowed to proposed alternatives, including restricted stock being introduced.
Berry said Weir will continue to engage with shareholders on its remuneration policies and will seek to jointly develop a revised policy to be considered in the future. Until then, Weir will operate under the remuneration policy approved by shareholders in 2014 and which runs to 2017.
Weir is far from the only company to have faced shareholder ire over its pay policies. BP PLC, the oil major, saw 59% of shareholders reject its remuneration report, while miner Anglo American PLC and medical devices maker Smith & Nephew PLC faced similar rebellions.
Also on Thursday, Irish pharmaceuticals company Shire PLC just managed to get its policy past shareholders, as 49% voted against its remuneration report. After publishing its meeting results, Shire then appointed Olivier Bohuon, the chief executive of Smith & Nephew and a Shire non-executive, to its remuneration committee.
Earlier on Thursday, Weir, which has been hit hard by the turmoil in the oil and gas and mining markets, said its like-for-like order input in the first quarter was down 22% year-on-year, with revenue declining by a broadly similar amount.
Revenue in the Minerals division, however, was stable on a like-for-like basis in the quarter, with input falling 5.0% but original equipment input better than anticipated.
"The group has maintained its focus on strong cash generation, aggressive cost reduction and developing the innovative solutions which have made Weir a global leader. This comes against the backdrop of ongoing challenges across our end markets," said Chief Executive Keith Cochrane.
As a result of the better-than-anticipated outcome for the first quarter, Cochrane said Weir said first profit should be slightly ahead of market expectations.
"Our full-year expectations remain unchanged, reflecting the slower recovery now anticipated in oil and gas markets," Cochrane added.
Weir shares closed up 9.1% to 1,196.63 pence.
By Sam Unsted; [email protected]; @SamUAtAlliance
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