UK - Bus, train and ferry operator Stagecoach Group risks a backlash from investors over targets for executive share options, corporate governance experts claim.
Proxy voting agency Manifest warns that investors could vote against the company’s remuneration report in protest against “retesting” allowances.Manifest believes shareholders at the group’s annual meeting tomorrow (August 27) are likely to be “disappointed” that the rules of the share scheme allow for two retests.
The corporate governance combined code recommends that targets for share options should be based on three-year performance levels, but Stagecoach executives can retest based on their fourth and fifth-year performance.
Manifest also questioned whether the board was sufficiently “independent”. It does not view non-executive director Ewan Brown and chairman Robert Speirs as independent due to length of tenure.
And it does not consider non-executive director Ann Gloag – who is a major shareholder, co-founder and in receipt of an £81,000-a-year pension from Stagecoach – to be independent.
Manifest recommends one more independent director be appointed to ensure the board complies with the revised combined code. This recommends that 50% should be independent directors, excluding the chairman.
Manifest spokesman Alan Brett said the 2004 season had seen institutional investors increasingly focusing on retesting. He said Stagecoach was one of a minority of companies which had not amended share scheme rules accordingly.
The National Association of Pension Funds expects its analysis of the 2004 proxy voting season to show “far fewer” votes against management than the previous year.
A spokesman said there had been particular progress on length of contracts.
The combined code recommends these do not exceed two years, and the NAPF claims firms are becoming increasingly compliant.
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