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The FTSE 100 stocks facing fallout over executive pay

A FTSE 100 stock board with fluctuating price action

The coronavirus pandemic’s impact on the finances of ordinary investors has drawn ire over what executives get paid. Many shareholders of FTSE 100 stocks have been arguing over the last year and a half that CEO pay should be adjusted to reflect the wider economic impact that Covid-19 has had.

Data published by Deloitte at the beginning of July showed that total executive pay had fallen for the fourth consecutive year in 2020. The average FTSE 100 CEO package was £2.85m, down from £4.04m in 2017. Around a third of FTSE 100 bosses received no bonus last year and more than half of executive directors had their salaries frozen.

Although many FTSE 100 companies have shown restraint when it comes to CEO pay, those that have handed out bumper packages have fallen foul of shareholders.

FTSE 100 CEO pay scrutinised

JD Sports boss Peter Cowgill made headlines in May after it was reported he had been paid around £6m in bonuses since February the previous year, despite the company accepting around £100m in Covid-19 support packages from the UK government. Cowgill himself had reportedly taken a 75% pay cut for several months, which had reduced his annual salary to £700,000.

Andrew Leslie, former chair of the remuneration committee that oversees executive pay at JD, wrote in the 2021 annual report: “I believe that bonus and long-term incentive plan outcomes continue to be reflective of the sustained outstanding performance of the Group. The posting of exceptional results during such a challenging climate demonstrates that the remuneration approach and steps taken throughout the pandemic continue to support and drive this performance.”

The retailer reported a marginal increase on revenue to £6.17bn in fiscal 2021. Pre-tax profit was down to £324m from £348.5m in 2020.

But many JD Sports shareholders have been less than impressed, and decided to oust Leslie at the AGM on 1 July. More than 54% of independent votes were against his re-election as a non-executive director. That said, the director’s remuneration report did receive a majority backing with 68.49% for and 34.51% against.

While this may not sound like much of a shareholder rebuke, Deloitte points out that the number of FTSE 100 constituents that received less than 80% of votes in favour of their annual remuneration report increased to 12% from 5% in 2020.

Investors take aim at Morrisons and Rio Tinto

One of this year’s biggest revolts was at Morrisons. CEO David Potts received £4.2m in total in the year ending 31 January, even though the company’s pre-tax profit plunged year-on-year from £435m to £165m. The remuneration report was only approved by 29.88% of independent votes cast, and though it wasn’t binding, it’s a sign of the level of discontent that has been brewing among shareholders.

Anglo-Australian metals and mining company, Rio Tinto, also angered shareholders by handing former CEO Jean-Sébastien Jacques a £7.2m package, an increase of 20% from the previous year’s pay. Jacques had overseen the destruction of a sacred, 46,000-year-old Aboriginal site last year and, along with two other executives, was forced to resign. Its remuneration report received just 38.37% of independent votes in favour.

Like Morrisons, the Rio Tinto vote is not binding, but where the mining group goes from here could prove to be a lesson in how to manage corporate relations disasters.

Shares in Morrisons and Rio Tinto were up 58.7% and 16%, respectively, in the year-to-date as of 3 August. Meanwhile, the FTSE 100 is up 9.9% in the same period.

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