UK Governance Watch

At AIM-listed infrastructure group Hargreaves Services’ 2017 AGM around 20% of shareholders opposed the adoption of its remuneration report. Shareholders likely held concerns with the level of disclosures provided in the report regarding performance targets and the lack of director shareholding guidelines and clawback provisions. The disclosures on these policy aspects continue to lack transparency this year.

Hargreaves operates an annual bonus as its sole incentive plan which is based entirely on profit before tax. While the profit targets utilised during the year have not been disclosed shareholders will note that no payout was awarded. Accordingly, whilst there is a lack of transparency, the total remuneration of CEO Gordon Banham is positioned within acceptable levels given the size of the Company and its sector. Although, shareholders may consider Banham’s salary to be set relatively high when compared to similarly sized peers.

Fellow AIM-listed Brooks MacDonald Group also holds its AGM this week and is seeking shareholder approval of a new long-term incentive plan. The plan will provide for annual grants of restricted shares of up to 50% of salary and will replace the previous long-term incentive plan which did not have individual caps. The shares will vest after three years subject to continued service and the achievement of three key underpinning performance criteria relating to: funds under management; maintenance of the dividend; and a satisfactory risk, compliance, internal control, and governance environment over the period. The remuneration committee has also introduced shareholding guidelines for executive directors thereby strengthening alignment with shareholder interests.

The introduction continues a restructuring of remuneration started last year, whereby the investment management firm replaced its profit-sharing scheme with a capped annual bonus plan and strengthened malus and clawback provisions. Last year 97% of shareholders supported the remuneration report indicating the Company has support for its direction of travel on remuneration. However, shareholders will note CEO Caroline Connellan received a second £100,000 cash payment during the year as part of the agreement at hire. Connellan joined Brooks MacDonald in April 2017 and in 2017 was granted a £100,000 cash award and share options in lieu of sacrificed awards granted by her previous employer. The vesting of the share recruitment awards coincides with the forfeited awards and a portion vested during 2018.