Pearson shareholders have staged a second revolt over the pay package of the education group’s new chief executive, disrupting a change in leadership and closing a week of conflict over UK executive pay.
More than 37 per cent of votes cast were against the remuneration report, among the largest revolts to hit a FTSE 100 company this year, as investors signalled their displeasure at a £7.4m pay deal for CEO Andy Bird at the annual general meeting on Friday.
The objections are troubling for Bird, a former Disney executive who joined Pearson in October and has pledged to turn the struggling company around with a direct-to-consumer strategy.
Although virtually all investors supported his appointment, the company has faced intense criticism over his remuneration package. Last week chairman Sidney Taurel, who had come under scrutiny over the deal, announced his intention to retire by early 2022.
After Bird was appointed last year, 33 per cent failed to back the US-style deal in an initial vote at a special meeting. One investor said on Friday that fewer had objected at the time because they had been “effectively blackmailed”, after the company warned Bird would only join if the plan was approved.
With Bird in place, shareholders were better able to signal their upset this year, the shareholder said, adding he had voted against the company’s pay report. “It was an incredible package. It has been handled really poorly,” he said.
Under the plan Bird will receive an annual salary of $1.25m on top of a pay incentive scheme which will allow him to buy $3.75m of Pearson shares, but be eligible for an award up to the value of $9.375m.
Shareholders on Friday also failed to back a proposal to hold general meetings with 14 day’ notice, with 45.21 per cent against. The motion did not pass because it required 75 per cent approval, while the pay package required only a majority.
Pearson said it was “pleased” to have secured majority support for the package, but the said it recognised the “significant minority” in opposition and would “engage further” before providing an update in six months.
“We have always recognised that the remuneration package needed to secure an executive of Andy’s calibre as CEO was unusual in a UK market context,” it said.
Ahead of the vote, Institutional Shareholder Services, the influential adviser, had urged investors to vote against pay because of the size of Bird’s remuneration package. It expressed concerns about the decision to link shareholder approval of the package last year with Bird’s confirmation as chief executive.
“The context of the vote at the time was an all-or-nothing choice between approving a suboptimal remuneration package in order to secure the CEO position, or further instability with no CEO in place,” ISS said.
The vote against pay at Pearson ranks among the biggest shareholder revolts at annual meetings so far this year and comes at the end of a bruising week for UK plc, where investors punished companies from Glencore to British American Tobacco over executive remuneration.
In the FTSE 100, only BAT and Imperial Brands, the tobacco companies, have suffered bigger shareholder objections than Pearson over executive pay so far this year.