Belfast Telegraph

Pearson boss’ bonus nearly doubles just one year after shareholder revolt

The publisher increased its chief executive’s annual incentive payout from £343,000 to £624,000.

Pearson released its annual report on Wednesday (Pearson/PA)
Pearson released its annual report on Wednesday (Pearson/PA)

Pearson boss John Fallon has seen his annual bonus nearly double just a year after a shareholder revolt over his pay packet.

The company disclosed on Wednesday that it had increased the chief executive’s annual incentive payout from £343,000 to £624,000, helping bring his total remuneration to £1.7 million.

That is up from £1.5 million in 2016.

Pearson’s annual report said that the 2017 annual bonus payout represented just 44% of what Mr Fallon could have earned had additional performance targets been met.

The remuneration committee also highlighted that there was no increase in Mr Fallon’s base salary, though it would rise by 2.5% in 2018 “in line with the average increases for UK employees”.

A Pearson spokesperson said: “Pearson delivered results in line with the demanding plan set at the beginning of 2017, and made good strategic progress against this plan.

“Given the level of performance achieved and the progress made during the year, the remuneration committee agreed on a limited increase in John’s overall remuneration.”

It comes nearly a year after shareholders vented their anger over a 20% pay bump for the publisher’s boss, with more than 65.59% of votes cast against the company’s remuneration report at its AGM last May.

The remuneration committee said it has listened to shareholder feedback and was “rebalancing the performance measures for 2018 awards”.

One third of any incentive pay will only be made available if targets are met for each of earnings per share, gross return on invested capital, and relative total shareholder returns – all measured over a three-year period.

Pearson job cuts

They will also be subject to a further two-year holding period, and the final value of the awards will depend on Pearson’s share price performance and dividends paid to shareholders over a five-year period.

In February, Pearson reported a 1% drop in sales to £4.5 billion, but swung to a statutory profit of £408 million compared to a £2.3 billion loss a year earlier, having been impacted by restructuring costs and a goodwill impairment charge from its North American business in 2016.

The decline in revenues last year came despite a £126 million boost from currency movements linked to the weaker pound, though business disposals dragged on sales by £54 million.

It follows the sell-off of its Global Education division last year as well as its 22% stake in Penguin Random House, which Pearson said would also knock 2018 operating profit by £44 million.

The company said it will also complete the sale of its Wall Street English unit as well as its stake in Mexican joint venture Utel during the first half of 2018, and is now preparing to sell its US K12 courseware business.

The move is part of efforts to simplify the business, with its efficiency drive set to result in around 3,000 job cuts by 2020.

Pearson is expecting to report adjusted operating profit of between £520 million and £560 million – which would mark a decline from the £576 million booked in 2017.

The publisher is forecasting “ongoing headwinds” in its US higher education courseware, but said it would be offset by improving conditions in its other businesses.

Pearson shares were flat following the release of the annual report.