Flutter shareholders urged to rebel against chief’s 26% pay hike

Proxy advisers sceptical of justification for outsized increases in executives’ basic salary

Shareholders in Paddy Power's parent, Flutter Entertainment, have been urged by two influential advisory firms to vote against the group's decision to award a 26 per cent basic salary hike to chief executive Peter Jackson and a 20 per cent increase to chief financial officer Jonathan Hill.

Institutional Shareholder Services (ISS), a proxy advisory company that provides large investors with voting recommendations on annual general meeting (agm) resolutions, said the increases are “not considered justified, especially against the background of a fall in share price”.

The company’s remuneration report is subject to a non-binding vote at its agm on April 28th.

Flutter Entertainment reported early last month that its core earnings fell by 11 per cent last year to come in at the bottom end of guidance, as easing Covid-19 lockdowns lowered demand for its products. Shares in the company have fallen by more than 40 per cent Dublin in the past year.

"The company was impacted by several tailwinds in the gambling sphere, including a swathe of sporting results that favoured gamblers, and regulatory pressure," said ISS.

Transformational merger

ISS noted that Flutter, which completed a transformational merger with Canada's The Stars Group in 2020 to create the world's largest gambling business, justified the pay increases against the background of a decision to postpone plans for a new long-term incentive plan (LTIP) for top executives.

Flutter’s annual report said that its remuneration committee felt it was not appropriate to proceed with a new LTIP at a time when the share price was declining. But it argued that the basic salary hikes, effective from the start of March, were “necessary to ensure that the executive director total packages are representative of Flutter’s business context, and are more competitive in both the current UK market and the wider US and international digital markets in which we operate”.

ISS said: "The fact remains that the company is listed in the UK and Ireland, incorporated in Ireland, and its directors are based in the UK. The application of US-style pay would create an executive remuneration cost higher than UK shareholders typically expect."

Scepticism

The increases put Mr Jackson’s basic salary at £1.17 million (€1.4 million) and Mr Hill’s at £715,000. Mr Jackson’s total remuneration last year came to £8.4 million, driven by awards under an existing LTIP.

Glass Lewis, another proxy advisory firm, which also advised shareholders to vote against Flutter’s remuneration report, said it “views high fixed pay raises with scepticism, as such remuneration is not directly linked to performance and may serve as a crutch when performance has fallen below expectations”.

Large increases in salary also have a compounding effect on sizes of short- and long-term incentives granted to an executive, since these are typically granted as a percentage of base salary, it highlighted.

“We have reservations regarding the scale of these increases, given the significant (17.5 per cent) increases awarded to the same executives in June 2020,” said Glass Lewis.

A spokesman for Flutter said that the increases, following engagement with the company’s largest shareholders, bring the executives’ basic pay into line with UK listed companies of a similar size and to “reflect the very significant growth in the business, notably in the US market, over recent years”.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times

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