ISS, a leading advisory firm to shareholders, has recommended that investors in Dublin-listed company Glenveagh Properties vote against the report of its remuneration committee at its annual general meeting (agm) next month.
ISS said it was advising investors to reject the remuneration report due to the committee’s use of upward discretion to increase the outcome of the company’s 2020 long-term incentive plan (LTIP), a move that would benefit chief financial officer Michael Rice.
Another advisory firm, Glass Lewis, is also understood to have recommended that investors vote against the report for the same reason.
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The Glenveagh remuneration committee’s exercise of upward discretion in respect of the incentive award will result in a portion of the award vesting that otherwise would have lapsed, ISS noted.
The committee had argued earlier this year that while earnings per share (EPS) grew during the performance period — which ended on December 31st, 2022 — the EPS condition under the 2020 LTIP was not met due to the impact of the Covid pandemic and, therefore, the formula used was not a fair reflection of the performance of the business and management team.
It changed the formula so that the percentage vesting under the EPS metric would be the same as that achieved under the plan’s second, equally weighted performance condition, which related to total shareholder return (TSR). This resulted in an overall vesting percentage of 74 per cent across both metrics.
But ISS said the formula alteration was a “material concern” and “not appropriate”.
“During the pandemic, many companies were negatively impacted and the motivation for discretion is not appropriate in our view. Furthermore, in this year there has been maximum payment under the bonus, and most of the TSR part of the LTIP had vested. Without any discretion, therefore, the executives had already benefited. For these reasons, support is not warranted for the remuneration report.”
‘Performance metrics’
In its report, the Glenveagh remuneration committee said that it had reviewed the vesting outcome in early 2023 “to ensure that it was fair and appropriate” in the context of “the overall performance” of the business and its stakeholders.
“The committee did not consider the formulaic vesting out-turn to be a fair reflection of the strong performance of the business and management team over the performance period. For this reason, the committee exercised discretion in respect of one of the performance metrics for senior management LTIP participants,” it wrote.
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This followed advice about a “potential adjustment” to the vesting outcome that it received from Ellason, its new external remuneration adviser, in December 2022.
The committee — which comprises independent non-executive company directors Pat McCann, Cara Ryan and Camilla Hughes — said it had engaged with major shareholders in early 2023 about the decision and sought shareholder support “to exercise the same level of discretion” in respect of chief financial officer Michael Rice “to treat all participants consistently”. Glenveagh’s chief executive Stephen Garvey was not a participant in the LTIP for 2020.
The Glenveagh remuneration committee also said in its report that the use of the discretion was “necessary” for the continued retention and incentivisation of Mr Rice.
The top executives at the home builder enjoy bumper pay packages. In 2022, Mr Garvey’s total take-home pay rose 63.4 per cent to €1.6 million, which included a bonus of €900,000. Mr Rice’s take-home pay more than doubled to €1.5 million, including a bonus of €500,000 and a further long-term incentive benefit of €545,643, which reflects the combined total from Glenveagh’s 2019 and 2020 LTIPs.
Glenveagh is due to hold its agm on June 8th.
