Thursday, 23 June 2011

Too little, too late for Sly shareholders

The news that Sly Bailey, Chief Executive of Trinity Mirror, is facing calls from shareholders for her to halve her £750,000 base salary is a clear sign that shareholder activism continues unabated. But don’t hold your breath waiting for Executive pay to tumble – we’ve been down this road before.

To be fair to shareholders in Trinity Mirror their central argument is a worthy one – namely that Bailey is now running a much smaller company compared to when she joined eight years ago and her remuneration should reflect that. Market sentiment towards Trinity Mirror can be gauged from the above one year share graph which bears a striking resemblance to the North Face of the Eiger!

However, on the flip side, Bailey will no doubt argue that the reason for the drop in market value of the shares is due to the economic downturn and slump in advertising and nothing to do with her stewardship of the company, so why should she take a pay cut?

In truth I have some sympathies for both positions but, always one to court controversy, I am siding with Sly on this one. My own view is that institutional shareholders have been asleep at the wheel on remuneration issues during the good times, allowing the horses marked ‘Executive Pay’, ‘Bonus Scheme’ and ‘Share Options’ to bolt out of the stables and off into the sunset. For them now to be stamping their feet up and down when they should have clamped down years ago is a bit rich.

I have much more sympathy with WPP shareholders who last week tried to vote down the entire WPP remuneration report at the Annual General Meeting, despite an excellent performance by the company. The reason for shareholder anger was the proposed 42% increase in salary for the head of WPP Digital, a certain Mr Mark Read. Explaining that his current £872,000 salary was “uncompetitive”, Jeffrey Rosen, chairman of the compensation committee, said: "Given the increased importance of digital strategy to the group and Mr Read's personal development, an increase to his remuneration was in order."

The Gravy Train rolls on!


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