Investors urged to vote against Morrisons’ pay

MORRISONS’ executive pay deal has been slammed by corporate governance watchdog Pirc as “excessive” and insufficiently challenging.

The research and advisory body has urged investors to vote against the Bradford-based supermarket group’s remuneration report when it holds its annual shareholder meeting on Thursday.

Pirc also challenged a share award worth £1.25m for finance director Richard Pennycook – the equivalent of 230 per cent of his base salary.

Sign up to our Business newsletter

Sign up to our Business newsletter

In a report to City investors, Pirc flagged concerns about “excessiveness and the balance between reward and incentive” in Morrisons’ remuneration report.

It said: “Total variable pay is excessive both in theory and in practice although the remuneration package is in-line for the sector.”

Pirc added earnings per share (EPS) targets and Morrisons’ long-term incentive plan (LTIP) “are not sufficiently challenging given current brokers’ forecasts for either upper or lower vesting points”.

The watchdog also said Mr Pennycook’s share award, which vests in March 2013, is out of keeping with best practice. The award is subject to Mr Pennycook’s continued employment and the group’s underlying EPS meeting or beating RPI inflation.

“The EPS targets attached to this award are not challenging and the restrictive period is not sufficiently long,” said Pirc.

“In addition, it has the potential to render the LTIP ineffective, particularly as less challenging EPS targets are attached to the award.”

Morrisons hiked Mr Pennycook’s pay and benefits in 2010 after its chief executive Marc Bolland defected to Marks & Spencer. His base salary was increased in February to £570,000 from £540,750.

In its annual report, Morrisons defended the share award. “While this is an unusual arrangement, the committee considers that the granting of this award is in the long-term interests of shareholders and is satisfied that it is appropriate,” it said.

The supermarket added its executive pay and benefits “meet the stated policies of encouraging a strong performance culture, emphasising long-term shareholder value creation and being positioned competitively in relation to major competitors to enable the company to attract, retain and motivate the best talent”.