Melrose Industries is facing a potential shareholder revolt over pay plans for its top bosses just weeks after sealing its controversial £8 billion hostile takeover of GKN.
Influential shareholder advisory group Glass Lewis has urged investors to vote against “excessive” payouts for executives at Melrose ahead of its upcoming annual general meeting on May 10.
It comes after Melrose awarded its four top bosses – Christopher Miller, David Roper, Simon Peckham and Geoffrey Martin – at least £42 million each in 2017 thanks to payouts under its 2012 long-term incentive plan (LTIP).
Glass Lewis said in a note it has “severe reservations about supporting the remuneration report at this time … all executives received what we consider to be excessive payouts under the plan”.
“As such, we are unable to recommend that shareholders support this proposal.”
The pay concerns threaten to thrust Melrose back into the public eye just weeks after its fight to take over GKN, which drew union and political anger.
Melrose won its takeover battle to buy GKN in March after securing the backing of the engineering giant’s shareholders and declared the offer unconditional in mid April.
Its victory brought to a close a bitter battle that had raged since January, with unions and MPs warning over job cuts, asset stripping and national security concerns throughout the takeover saga.
Glass Lewis said the remuneration plans “far outpaced” that of other European companies of a similar size.
Each of the four top executives at Melrose picked up £41.7 million worth of shares under the incentive scheme, on top of salaries and benefits.
They were each also handed 3% pay rises.
Mr Peckham, chief executive, and Mr Martin, the finance director, saw their pay packages further boosted by annual bonuses worth £428,000 and £342,000 respectively.
In its recent annual report, Melrose insisted that its remuneration “philosophy” is to “pay only for performance”.
It claimed that management have created £3.6 billion of shareholder value since the 2012 long-term incentive plan was introduced.
The firm said: “This validates the incentive arrangements as a highly effective and essential mechanism in establishing the necessary environment for management to produce the significant returns enjoyed by shareholders to date.
“We believe that this remuneration strategy has also directly driven historical outperformance when compared with our competitors and supported the company’s success.”
Melrose said: “We find Glass Lewis’ contention that the remuneration via LTIP is not linked to company performance completely bizarre. It is 100% dependant on Total Shareholder Return versus an RPI+ hurdle and no other measure.”