Greencore investors urged to reject CEO’s new bonus package

ISS advises shareholders to refuse Patrick Coveney’s pay deal

Greencore's new pay deal for Patrick Coveney, which will see the chief executive's maximum long-term share bonus double, should be rejected at a shareholder meeting next week, as there is no sign it has been set against more onerous targets, according to one of the world's influential proxy advisory firms.

The convenience food group revealed plans last month to double the amount that can be granted to Mr Coveney (46) under a so-called performance share plan, to 200 per cent of salary, for the year to September.

Greencore has said that its remuneration committee proposed changes to the executive remuneration policy following consultation with the company's largest shareholders during 2016.

“The purpose of the proposed changes are to more closely align the remuneration arrangements of executive directors with the successful delivery of the Company’s long term plan,” it said in a statement.

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Greencore said it would continue to consult its shareholders relating to remuneration policy and “ will continue to evolve the details of its policy in accordance with best practice.”

However, Institutional Shareholder Services (ISS), one of the main international firms that provide big investors with corporate governance advice ahead of shareholder meetings, said: "The company's rationale is not considered to be particularly compelling."

“The additional award size has not brought on any increased stretch in the performance conditions, which have been generally static for several years,” said ISS, ahead of a non-binding shareholder vote on the matter at Greencore’s annual general meeting on January 31st.

Half of the maximum bonus award under the new plan remains based on Greencore growing its full-year earnings per share by 15 per cent.

A further 25 per cent is based on return on invested capital (ROIC) expanding by 15 per cent, up slightly from 14.5 per cent, previously.

ISS noted that Greencore has highlighted that it considers the target "stretching", as ROIC will be depressed this year after it invested heavily in facilities in the UK and US in 2016 and as it spent $747.5 million (€698 million) earlier this month buying Illinois-based food company Peacock Foods to quadruple its sales in the US.

Reasonable alignment

Another proxy advisory firm, Manifest, said the chief executive's total remuneration package "is excessively weighted toward performance pay".

Mr Coveney’s total compensation was £2.52 million (€2.92 million) last year.

Still, Manifest said that the 2017 executive remuneration package, which will also see maximum awards under the chief financial officer’s performance share plan rise to 150 per cent of salary from 100 per cent, has a “reasonable degree of alignment between directors’ and shareholders’ interests”.

However, it added: “There may be concerns over the robustness of performance targets.”

Greencore said in a statement that its remuneration committee “has been concerned for some time that the performance related incentive for Greencore executives has been below the average of FTSE companies ranked 150 to 250 in the index and has not been at a level commensurate with the scale and complexity of the business.”

As a consequence, it said,” an increase in the maximum limit in the performance share plan plus a two year holding period on vested awards have been recommended.”

Both ISS and Manifest also highlighted that executive directors are entitled to 12 months’ salary plus the amount of bonus paid in the prior year if their position is terminated in the event of a change of control of the group.

They can terminate their own employment if they have “reasonable grounds” to contend their powers or functions will be diminished after a takeover.

Meanwhile, a third advisory firm, Glass Lewis, viewed the new executive share incentive plan as "broadly positive", as it introduces a two-year holding period before the company hand the shares over.

“While shareholders may be concerned about the proposed increase to individual LTIP (long-term incentive plan) limits, we note that the overall variable pay opportunity remains reasonable,” Glass Lewis said.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times