Sir John Peace's position as Burberry chairman under pressure after firm suffers one of biggest shareholder rebellions on pay
Sir John Peace’s position as chairman of Burberry was under pressure last night after the firm suffered one of the biggest shareholder rebellions on pay.
Investors have rounded on senior board members, questioning both their independence and effectiveness, after more than half voted against ‘obscene’ pay awards for its top bosses that include a £20m pay deal for new chief executive Christopher Bailey.
One investor said this was a wake-up call for the firm to beef up its board: ‘I think there has been a disconnect between investors and the firm.
Off-colour: Investors have rounded on senior board members, questioning both their independence and effectiveness
‘It’s the role of the chairman to listen and act and if this does not happen the problem needs to be fixed one way or another.’
Peace’s independence as chairman has been questioned because he was previously chief executive of GUS, the former parent company of Burberry. And senior independent director Philip Bowman is no longer considered independent because he has served for more than nine years, which falls foul of governance rules.
Shareholder advisory group Pirc had already warned that ‘there is insufficient independent representation on the board’ and told investors to vote against the re-appointments of Peace, Bowman and vice chairman David Tyler.
As many as 53 per cent of votes cast by investors at the firm’s annual meeting went against its directors’ remuneration report.
The main bone of contention was 1.35m shares awarded to Bailey prior to him taking up his new role as an incentive to stay with the firm after he was made an offer by a rival. The shares, which are not linked to performance, could be worth £20m.
Nick Bubb, an independent retail analyst, said the scale of the revolt was an embarrassment for Peace.
‘I am sure Burberry is going to have to speak to investors as it is a pretty big revolt,’ he said.
‘The big egos in the fashion world can be hard to handle. There was that embarrassing video Peace presented when Bailey was appointed.
‘Investors might not have voted him down this year but he needs to be careful about next year.’
Bailey, who was previously chief creative officer and succeeded former boss Angela Ahrendts, is in line to receive up to £10.3m a year in salary, pension, variable bonuses and long-term awards. He is also due to receive shares worth £20m by 2018 under a previous ‘golden handcuffs’ arrangements with the group in his previous role to prevent him from joining rivals.
Speaking at the annual meeting, Peace said: ‘The board took the view that it was essential that we retain Christopher in the business, mindful of the huge value he has created and would create in the future as one of the world’s leading fashion designers.
‘We achieved this by putting in place a new remuneration package similar to that paid to Angela including allowances and other benefits and granting him a further award of shares which would only vest in full if he remained with the company for a further five year period.’
The Investment Management Association, which advises pension funds on how to vote, had already slapped the company with an embarrassing ‘amber’ warning over the scale of its pay deals.
Dr Roger Barker, from the Institute Of Directors, said: ‘Burberry shareholders have fired a warning shot with today’s vote.
‘They are clearly not convinced that executive pay at the company has been transparently linked to tough performance targets. The onus in now on the board to urgently engage with shareholders to convince them they are responding to their understandable concerns.’
The company last year enjoyed strong growth, with sales up 17 per cent to £2.3bn.
But shares have slipped slightly in the last 12 months on fears of slowing economic growth in China.
Shares closed 12p lower at 1452p, valuing the fashion house at £6.4bn.
Most watched Money videos
- BMW's Vision Neue Klasse X unveils its sports activity vehicle future
- Inside the new Ferrari V12 Cilindri
- Skoda reveals Skoda Epiq as part of an all-electric car portfolio
- 2025 Aston Martin DBX707: More luxury but comes with a higher price
- Land Rover unveil newest all-electric Range Rover SUV
- MailOnline asks Lexie Limitless 5 quick fire EV road trip questions
- How to invest for income and growth: SAINTS' James Dow
- Tesla unveils new Model 3 Performance - it's the fastest ever!
- Mini celebrates the release of brand new all-electric car Mini Aceman
- Blue Whale fund manager on the best of the Magnificent 7
- Mini Cooper SE: The British icon gets an all-electric makeover
- 'Now even better': Nissan Qashqai gets a facelift for 2024 version
- MIDAS SHARE TIPS UPDATE: Wind is turning in Octopus...
- MIDAS SHARE TIPS: Why it soon won't be hip to give the...
- Cost-of-living crunch wipes shine off Thomas Sabo jewellery
- TONY HETHERINGTON: Boss behind firms fined £340k for over...
- 86-year-old Peter's woes with a faulty smart meter that...
- Virgin Money's biggest independent investor...
- CITY WHISPERS: Bill Ackman's cerulean eyes charm...
- JOHCM UK EQUITY INCOME FUND: Rate cuts... and a spending...
- North Sea projects worth £21bn put at risk by Labour: Tax...
- British businesses awash with 'accidental' bosses who...
- A good week - not before time, but let's not get carried...
- Hollywood silly money? I'd only have stuffed it under the...
- Where is Labour's 'white heat' revolution to revive...
- Helium and hydrogen company set to join stock market in...
- Britain's nascent battery industry receives shot in the...
- Shipping broker Clarksons on list of shame after...
- Ikea pushes back opening of its Oxford Street store to...
- MARKET REPORT: S4 Capital shares soar as Sir Martin...