Shareholders in Burberry have rejected the pay package of the company’s Halifax-born boss, after staging one of the biggest investor rebellions of recent years.
Results of voting at the group’s annual general meeting in London showed 52.7 per cent of investors voted against a resolution which included a £7.2m “golden hello” for Christopher Bailey, who was previously chief creative officer.
It was being seen as a protest vote, because the outcome is non-binding and related to awards over the last financial year.
Last night, Professor Christopher Bovis of Hull University Business School, said the UK had one of the most relaxed systems for executive pay and, under the current rules, Mr Bailey is entitled to keep his pay.
Including this performance-based shares package, split over five years, 43-year-old Mr Bailey is in line to receive up to £10.3m a year in salary, pension, variable bonuses and long-term awards each year. He is also due to receive shares worth £19.5m by 2018 under previous “golden handcuffs” arrangements with the group in his previous role to prevent him from joining rivals.
Afterwards, Mr Bailey appeared to brush off the suggestion that he might hand back pay, saying: “It’s not about giving something up. It is not something I made the decision on, it is the remuneration committee and the chairman and the board.”
Chairman Sir John Peace said he was “disappointed” and would talk to shareholders to try to allay their concerns.
Sir John said: “It really is an expression to us of concern over some aspects of our remuneration and I think it specifically relates to Christopher. I want to understand why they felt so strongly to vote against. When I understand it, I’ll know what to do.”
Sir John defended the decision to give both Mr Bailey and previous boss Angela Ahrendts - who he succeeded earlier this year - share awards in 2010 to keep the “world-class executives” at the company.
Mr Bailey was granted a further share award last year as he was offered jobs by rivals for “much higher than his existing package”.
Defending Mr Bailey’s pay as chief executive, Sir John said: “We know that the amount paid to Christopher is a lot of money but a lot of it is performance related which he will only receive if Burberry performs strongly, and this of course will also benefit shareholders.
“He could command a much higher package outside the UK where the size and the nature of remuneration can be different and quite often not publicly disclosed.”
He pointed to the departure of Ms Ahrendts for a senior role at Apple for a package worth 60 million US dollars (£35.1m).
Sir John said Mr Bailey had been “nervous” ahead of his first AGM as chief executive.
But he was applauded by investors and there was little resistance to his pay arrangements among the 80-100 gathered for the meeting in central London, where one even said the new boss was “worth every single penny”.
Commenting on the vote, Professor Bovis said: “A failure of the UK corporate governance system is the lack of control of executive pay, including performance related pay, bonuses and incentive schemes. In the wake of the credit crisis, guidelines were issued to curb excessive directors’ remuneration and align any performance related pay with shareholder value, but British companies tend to ignore them. Ultimately, the shareholders have the authority and control over the company, and should they wish to exercise such control the rules allow so. In such case, the non-binding resolution over excessive pay could take the form of a remuneration committee covenant, and restrict directors’ pay. Until then, Christopher Bailey is perfectly entitled to his remuneration.”