Harvey Norman Facing Hostile GM Over Claims Executives Are Paid Too Much
Executive Chairman Gerry Harvey is facing a hostile showdown after the Australian Shareholders Association advised shareholders to vote against the Companies remuneration report, citing unsuitable hurdles for short term and long term incentives and a lack of independent directors on the nine-person board.
Gerry Harvey claims that Harvey Norman’s executive pay was lower than that at 70 to 80 per cent of similarly-sized and smaller companies.
Fairfax Media claim that more than 25 per cent of shareholders vote against the remuneration report again this year, after a first “strike” last year, it would trigger a vote to spill the entire board, including Mr Harvey and managing director Katie Page.
“If you strike against us you’d have to strike against 70 or 80 per cent of them,” Mr Harvey told Fairfax Media on Monday. “I’d be extremely disappointed if someone has a strike against our remuneration report.”
Mr Harvey owns 30 per cent of Harvey Norman and does not vote his shares on the remuneration report. However, industry observers believe he would vote his shares in the event of a spill motion.
The ASA claim that Harvey Norman’s STIs are all paid in cash, as opposed to a mix of cash and shares, and financial criteria account for only 20 per cent of the total award, with 80 per cent subject to non-financial criteria.
Further, the use of subjective non-financial hurdles for LTIs do not appear to align the shareholder and management interests.
“We’ve tried to be as compliant as possible,” Mr Harvey said. “If people vote against you when you’re trying your best what do you do?”
Mr Harvey also dismissed suggestions that Harvey Norman needed more independent directors, saying it was more important to have directors with retail skills and “skin in the game”, pointing to the lack of retail expertise on the boards of several underperforming retailers.
Mr Harvey will also be under pressure to explain the company’s recent $34 million investment in one of Australia’s largest dairy farms.
The company has defended the investment, saying it is confident the deal will deliver returns.
But investors say it is outside Harvey Norman’s core competence and highlights the lack of independence on the board.