Morrisons chairman ‘surprised’ by shareholder revolt

Shareholder advisory group ISS said performance targets for Morrisons boss David Potts were too low. Picture: Contributed
Shareholder advisory group ISS said performance targets for Morrisons boss David Potts were too low. Picture: Contributed
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Morrisons shareholders have vented their anger over a planned bonus bump for chief executive David Potts, with nearly half voting against the supermarket’s remuneration report.

Chairman Andy Higginson said he was “surprised” by the result, which saw 48.11 per cent of shareholder votes cast against the remuneration report, which looks back at the way that the company’s pay policy has been applied over the past year.

We were surprised not to get a higher vote in favour of the directors’ remuneration report

Andy Higginson

Only 51.89 per cent voted in favour at the retailer’s annual general meeting.

• READ MORE: Morrisons turnaround continues with surge in profits

Higginson said: “We consulted widely with shareholders on the new remuneration policy which received strong support with more than 92 per cent in favour so we were surprised not to get a higher vote in favour of the directors’ remuneration report.”

Meanwhile, the grocer was today slapped with a £10,500 fine after sending out more than 130,000 emails to customers who had opted out.

An investigation by the Information Commissioner’s Office (ICO) found Morrisons “deliberately sent” 130,671 emails to people who had expressed their desire not to receive marketing related to their Morrisons More loyalty card.

The ICO said the emails, sent in October and November last year, were titled Your “Account Details” and invited customers to change their marketing preferences to start receiving money-off coupons, extra loyalty points and the “latest news” from the chain

As a result, Morrisons was found to be in breach of privacy and electronic communication regulationsand fined £10,500.

Simon Entwisle, ICO deputy commissioner, said: “It is vital that the public can trust companies to respect their wishes when it comes to how their personal information is used for marketing.

“These customers had explicitly told Morrisons they didn’t want marketing emails about their More card. Morrisons ignored their decision and for that we’ve taken action.”

Morrisons said: “We sent out an information message to a small percentage of our customers that aimed to provide some helpful information about our service. We did this with the best of intentions and we’re disappointed that this was deemed to be ‘marketing material’.”

Yesterday’s shareholder revolt came after advisory group Institutional Shareholder Services (ISS) had urged investors to reject the retailer’s remuneration report, arguing that performance targets for Potts were too low, while increases to the long-term incentive plan (LTIP) award were above average.

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Morrisons’ remuneration committee had outlined plans to increase the potential LTIP award from 240 per cent of director salary to 300 per cent.

If the LTIP and other award targets were met – including those for free cash flow, sales and earnings per share growth – it would result in Potts receiving a total pay package of £5.3 million in 2020, compared to the £2.79m he received for 2016/17.

Higginson said he “fundamentally disagreed” with ISS’ assessment of the company’s targets.

“Not only does the board believe the targets to be significant and stretching, but the judgement on what the right measures are goes to the heart of rebuilding the business for the long term – striking the right balance between investment in the business and continued outperformance,” he said.

• READ MORE: Investors ‘ready for a fight’ over executive pay

Morrisons’ remuneration policy, which outlines the way the company intends to reward its executives over the coming years, passed by 92.35 per cent. However, 7.65 per cent of votes were cast in opposition to the policy.

The vote for the remuneration report was not binding, though a shareholder rebellion against the policy would have forced the company to make changes to its director pay plans.

Morrisons earlier this year reported a 49.8 per cent jump in pre-tax profits to £325m while revenue rose 1.2 per cent to £16.3 billion, solidifying the chain’s return to form under Potts.

On top of a deal to sell its groceries through online retail giant Amazon, he has ploughed investment into price cuts and called time on under-performing stores in his attempts to turn the page on the supermarket’s ill-fated era under ousted boss Dalton Philips.

His efforts come as the grocery sector’s so-called “big four” – Tesco, Asda, Sainsbury’s and Morrisons – remain locked in a bitter price war sparked by German discounters Aldi and Lidl.

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