Grafton investors urged to reject new chief executive’s pay premium

Grafton Group’s shareholders have been urged by a leading advisory firm to vote against the £740,000 (€840,500) basic salary of its new chief executive, Eric Born, as it “significantly exceeds” the pay of his predecessor and peers of a similar market value.

Glass Lewis, a proxy advisory firm that makes voting recommendations in advance of annual general meetings (AGM), noted in a report that the agreed salary of Mr Born, who took charge of the company in November, represented a 17.5 per cent premium to former chief executive Gavin Slark’s salary. Mr Born also received, on joining, a long-term incentive plan award of shares with a value of half his base pay.

UK-listed companies of a similar size to Grafton, the DIY retailer and builders merchants group, typically pay their chief executives closer to £650,000, Glass Lewis said.

Mr Born, a Swiss national and former Olympian, who competed in the men’s half-lightweight judo event in the 1992 Barcelona games, previously headed aviation services provider Swissport International and supply chain solutions provider Wincanton in Britain and Ireland.

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“We appreciate director Born’s relevant executive experience as CEO at Swissport International AG and Wincanton plc,” said Glass Lewis. “Nonetheless, we generally believe that increases in base salary of this magnitude should be phased over a number of years, reflecting performance in the role and increased experience and knowledge of the company, particularly given director Born lacks experience in publicly-listed entities of a similar scope and complexity to Grafton Group.”

Dublin-based Grafton, whose brands include Woodie’s, Chadwicks and Selco Builders Warehouse, is due to hold its AGM on May 4th.

The group posted a better-than-expected 1.7 per cent increase in adjusted pretax profit last year, to £273.3 million, as revenue increased by 9.1 per cent to £2.3 billion. Rising prices outweighed a fall-off in demand as post-pandemic spending returned to normal.

Mr Slark, who left Grafton at the end of 2022 after 11 years with the business, saw his total remuneration drop to £790,000 from £2.88 million, as he forfeited his right to a bonus on stepping down. He subsequently joined UK-based insulation and construction products distributor SIG as chief executive.

Institutional Shareholder Services, another proxy advisory firm, also raised concerns about Mr Born’s starting salary, but accepted Grafton’s explanation that the appointment “was made against the backdrop of a competitive marketplace that has a finite pool of high calibre individuals operating at CEO level with experience of running large international businesses”.

Meanwhile, Grafton said on Wednesday that it has completed a £93.3 million share buyback programme that was announced in November, with the 10.89 million shares repurchased and cancelled representing 4.8 per cent of its issued share capital.

It brought the total cash returned to shareholders since last May to £193.3 million under the two buyback programmes.