Shareholders in Crest Nicholson have rebelled over its executives’ pay, with 58 per cent of votes cast against the housebuilder’s remuneration report in the first defeat this year.
Investors rejected Crest’s latest attempt to cut profit targets at which incentives under its long-term pay plan kick in. The company had already downgraded the goals once.
However, the FTSE 250 group does not plan to make changes to the pay scheme in response to the vote, although it will continue consulting with shareholders.
The non-binding vote at the FTSE 250 group comes amid widespread disquiet over pay levels for corporate management. Government ministers are considering tougher measures to enable shareholders to rein in salaries and bonuses, while pension funds have demanded more power over pay at companies in which they invest.
The vote at its annual general meeting on Thursday followed advice from ISS, the shareholder advisory group, that investors should register their disapproval.
Standard Life Investments, Crest’s second-largest shareholder, said: “We were disappointed that the company chose to substantially reduce the profit range at which incentives for management were paid, without consulting shareholders. As a result we voted against the remuneration report.”
Some 72 per cent of shareholders opted to vote, with 58 per cent of those rejecting the policies.
Shareholders stopped short of opposing the group’s future management pay policy in a separate binding vote, however, with 96 per cent of those votes supporting the policy.
The company said on Thursday it was “disappointed the advisory vote for this year’s remuneration report was not carried”.
The show of anger comes as the government considers introducing annual binding votes on some pay reports. One option is to impose binding votes on companies whose shareholders have previously rebelled.
£2.16m
paid to chief executive Stephen Stone in 2016, including salary, bonuses, benefits and pension payments
Last month an influential group of UK pension funds demanded a greater say on pay and signalled a stormy corporate voting season ahead. A poll of pension funds last year found 90 per cent thought company executives were overpaid.
Since 2013 companies have been required to hold binding votes on future pay policies every three years, but investors have rarely used their power of veto; Weir, the industrial valve and pumpmaker, lost a vote in 2016, while Kentz, the engineering group, was the first to lose a vote under the policy in 2014.
At Crest Nicholson, which built 2,870 new homes in the year to October 2016, chief executive Stephen Stone was paid £2.16m for that year, including salary, bonuses, benefits and pension payments. Patrick Bergin, group finance director — since promoted to chief operating officer — was paid £1.18m.
Executives’ long-term incentive plans (LTIPs) at the company are based on metrics linked to pre-tax profit and return on capital employed. The profit element sparked controversy after Crest twice cut the targets at which awards would be payable.
According to ISS, management had a target of cumulative annual growth of 18 to 22 per cent for their awards for 2015, but after two years of cuts, in 2017 they would have needed to deliver growth levels of 5-8 per cent. ISS said that “looking at available broker forecasts, the revised PBT targets do not appear to be sufficiently stretching”.
Crest Nicholson said the goalposts were moved because “the board expects the rate of profit growth will remain robust but not at levels seen in recent years”.
Crest expected a slower rate of profit growth because of “tough comparators, additional investment in land, examining approaches to off-site manufacture and a new division required to support our stretching annual growth targets”.