Burberry climbs down as investors turn on executive pay

Shareholder advisory group ISS has advised its members to vote against the remuneration report at Burberry’s AGM next month in spite of a climbdown by the luxury retailer.

Burberry had decided to award multimillion pound share awards to outgoing chief executive Christopher Bailey and new chief financial and operating officer Julie Brown, who joined the business in January from medical technology company Smith & Nephew.

Financial pressure

Bailey remains as chief creative officer of the company but hands over the chief executive reins to Celine’s Marco Gobbetti next week. This followed concerns that he was overstretched at a time of intense financial pressure driven by critical markets in Asia suffering and the US department store business declining.

Bailey was the recipient of a £5.4m exceptional share award, which investors objected to owing to Burberry’s poor financial performance, but which the business decided to uphold subject to strict performance criteria, which meant the award vested at 50%.

Brown’s award was intended to compensate her for the loss of performance-related awards which would have been handed to her had she remained at Smith & Nephew – and it was this that raised ISS’ hackles.

Brown has now handed back about half, £0.8m, after the investor adviser drew attention to the fact that Smith & Nephew executives had actually received smaller awards than the package that the Burberry board thought Brown was giving up.

Brown also voluntarily gave up 75%, £1.6m, of her executive share payment, which was awarded as a long-term incentive, because she started at Burberry later than expected.

Matching compensation

ISS was dissatisfied with this and argued that Burberry’s remuneration structure meant that Brown could still receive “matching” compensation which exceeds what she would have been paid by Smith & Nephew.

Burberry said: “Our shareholder feedback is important to us and we take it very seriously, acting on it where right to do so. As you would expect, we continue to actively speak to our shareholders on remuneration.”

The revolt is the latest in a string of shareholders attacks on executive pay packages. Both Tesco boss Dave Lewis and Morrisons boss David Potts have been under scrutiny over their remuneration in recent months.