Concern Over JB Hi Fi Exec Pay Packets
Despite JB Hi-Fi executives delivering record share growth it appears that some are not happy about the pay package handed out to group CEO Richard Murray and other senior executives.
During the past 12 months and after what appears to be the successful integration of The Good Guys acquisition JB Hi Fi is facing a tough AGM after shareholders, proxy firm ISS Governance Services and the Australian Shareholders’ Association (ASA) both recommended a vote against JB Hi-Fi’s “problematic” remuneration report.
At last year’s AGM, JB Hi-Fi avoided a strike on its remuneration report, with only 21 per cent of shareholders voting against it.
Since the last Annual General Meeting JB Hi Fi shares have risen from $21 to $35.60 despite this historic rise at a time when most other retailers shares are going backwards shareholders are concerned over JB Hi-Fi’s new combined incentive project, known as the variable rewards program, that combines long and short-term incentives into one measurable remuneration deal.
Performance under the rewards initiative is weighted 75 per cent towards financial outcomes over the preceding financial year and 25 per cent towards longer-term strategic outcomes including workplace safety and diversity.
ISS’ concerns relate to the one-year assessment period for performance, JB Hi-Fi’s “inferior” disclosure of the incentive program’s strategic outcomes and the fact that dividends are payable on the unvested shares.
The ASA are concerned over future performance conditions on the shares issued under the incentive program, they want long-term financial measures despite uncertainty about the economy or consumer electronics market.
Three-quarters of the remuneration deal is based on the issuing of restricted shares with full dividend entitlements, which have no further performance conditions and vest over the following three years.
Under the proposed package Mr Murray received a fixed salary $1.32 million and another $1.5 million in share-based payments for the last financial year.
The SMH claims that ISS’ concerns relate to the one-year assessment period for performance, JB Hi-Fi’s “inferior” disclosure of the incentive program’s strategic outcomes and the fact that dividends are payable on the unvested shares.
The ASA also took issue with the lack of future performance conditions on the shares issued under the incentive program, calling for the board to introduce long-term financial measures.
In a statement, a JB Hi-Fi spokesperson said prominent proxy firms Ownership Matters, Glass Lewis and the Australian Council of Superannuation Investors (ACSI) had backed the company’s remuneration report.
“While we have met with Ownership Matters, Glass Lewis, ACSI, ASA and directly with a number of shareholders, ISS declined a meeting,” they said.
Glass Lewis said its support was contingent on a “disciplined approach” to target setting for the plan going forward.
JB Hi-Fi also introduced minimum shareholding requirements for its executives, which require Mr Murray to hold the equivalent of 150 per cent of fixed remuneration in shares and other key executives to hold 100 per cent.
If more than 25 per cent of shareholders vote against the company’s remuneration report the company will receive a strike. Companies that receive strikes at consecutive meetings face a spill of their entire board.