Faroe bows to ‘shareholder spring’ as bonus plan shelved

By PERRY GOURLEY
Published on 25/05/2012 03:44

OIL and gas explorer Faroe Petroleum became the latest company to get drawn into the “shareholder spring” yesterday, heading off a potential investor rebellion over a long-term bonus scheme.

Shortly before its annual shareholder meeting in London, the Aberdeen-based company announced that it was withdrawing a resolution to seek approval for a so-called “exceptional performance incentive plan”.

Although the plan had been informally agreed with major shareholders at the end of last year, it is thought the recent high-profile protests over executive pay had led to concerns being expressed by some institutional investors who indicated they would abstain from voting.

Two corporate governance groups, Manifest and ShareSoc, had also voiced opposition to the plan – which could have seen chief executive Graham Stewart awarded free share options potentially worth up to 1 per cent of the value of the company, some £3 million at last night’s close – ahead of the meeting.

Concerns raised included that the performance conditions under the plan were largely linked to relatively short-term share price progress.

Sarah Wilson, chief executive of Manifest, yesterday said she believed the company had “seen the whites of the eyes of the ballot cards” on the issue.

“This had all the characteristics of creating a lot of concern for shareholders. The company has responded to the concerns and will now have to go back to the drawing board.”

Roger Lawson, chairman of ShareSoc, who attended the meeting along with just three other individual investors, spoke out over what he described as “poor” remuneration policy in general at the company and said the vote on the directors’ remuneration report had only “just scraped through”.

Faroe declined to confirm the figures but it is understood that only 56.7 per cent of proxy votes cast had supported the remuneration report.

Faroe, whose shareholders include Korean-owned Dana Petroleum, Perth utility SSE and Edinburgh-based fund manager Artemis, said that it now intends to make a number of changes to the proposed incentive plan. Tim Read, chairman of the remuneration committee, stressed that the plan had been designed following requests from its institutional shareholders to “align management interests with shareholder interests” and in conjunction with independent remuneration consultants.

“The context of management incentivisation has clearly changed over the last few weeks and the board felt it appropriate to re-visit the issue to make a number of changes to the proposed long-term incentive scheme to re-align it with current shareholder sentiment,” he added.

The company was also defeated for the second year running on a resolution which would have allowed it to issue 5 per cent of the share capital to raise money without consulting shareholders.

Meanwhile, drilling has started at Faroe’s first operated well off Norway, the Clapton prospect in the Norwegian North Sea. The well is about three miles east of the Eldfisk East Field and six miles north of the Valhall Field.

Total boardroom pay at Faroe rose to £1.8m from £1.65m last year with Stewart’s total pay package rising to £628,000, up from £571,000.

Shares in Faroe closed up 2.25p at 157.5p.