Mike Ashley’s Frasers Group faces a showdown with shareholders on Wednesday as it seeks approval of a £100m bonus scheme for its incoming chief executive Michael Murray and a cash bonus for its finance director despite having accepted millions of pounds in government support.
Influential advisory groups Pirc and Glass Lewis advise shareholders to vote against the remuneration plan at its annual shareholder meeting, flagging “excessive payouts”, while proxy voting service Minerva Analytics said shareholders may regard the ultimate payout as “unreasonably high” despite the stretching target set.
Murray, who is the fiance of Ashley’s daughter, is set to receive just over £100m if Frasers’ share price hits £15 for 30 consecutive trading days in the four years from 7 October 2021, up from about £7 at present. The bonus would come on top of his base salary of £1m a year.
Frasers announced in August that Murray, who began working for Ashley’s retail group in 2016, was set to take over from his future father-in-law as chief executive next year.
Chris Wootton, Frasers’ finance director, would receive up to £9m under the new share bonus scheme, which would begin to pay out if the share price hit £12 for the 30-day period according to Frasers’ annual report.
In the past year, Wootton was awarded a £100,000 cash bonus on top of his £150,000 salary in recognition of his “exceptional efforts in leading the company through a period of unprecedented challenge” during the pandemic. On 1 May this year his salary was raised to £250,000 and he can earn an annual bonus of up to £500,000 more and up to £9m under the new long-term share bonus scheme.
Frasers said the targets of the new share bonus scheme were both “stretching and achievable”.
However, the payments come after Frasers claimed £80m in furlough assistance and £97.5m in business rates relief globally last year – the company did not split out how much it claimed in the UK, but it is likely to be the majority of that figure.
Glass Lewis advised investors to block approval of Frasers’ remuneration plans as it was “concerned with committee’s decision to grant a discretionary bonus to the CFO, particularly in light of the stakeholder experience through the Covid-19 pandemic”.
It also expressed “serious reservations” about the new share bonus scheme which it said could reward “short spikes in performance, as opposed to sustainable long-term growth”.
Pirc also advised investors to oppose the new share bonus scheme saying incentives linked solely to a company’s share price risked rewarding failure. “Uplift [in the share price] by favourable macroeconomic influences may see executives disproportionately rewarded for minimum effort,” its report said.
Pirc said investors should not approve the group’s remuneration report and the reappointment of chairman David Daly and senior independent director Richard Bottomley.
Bottomley is criticised, as head of the audit committee, because Frasers has no externally run whistleblowing hotline. “This suggests that such concerns that should be raised by a whistleblower are dealt with internally, which may increase the risk of such issues not being followed up or escalating to a level where the higher was the level of the misconduct, the more likely is the issue to be concealed.”