At the Glasgow-based firm’s annual meeting yesterday, more than 72 per cent of votes cast were against its remuneration policy, which would have offered restricted share awards that were not subject to performance targets.
City fund manager Hermes, which advised its clients to vote against the motion, said: “To focus on creating long-term value, we believe the company should have performance targets and apply the test of common sense if these prove to be unrealistic due to unanticipated market conditions.”
Weir chairman Charles Berry said: “The policy was designed to ensure fairness and consistency across senior management levels and followed extensive consultation with shareholders, who held a wide range of views.
“A majority of shareholders were clearly uncomfortable with a new approach which did not follow standard UK practice.”
He added: “The board looks forward to further engagement with shareholders regarding remuneration, as we jointly develop a revised policy for consideration in the future. We encourage all shareholders to actively participate in this process, as without this engagement their views can’t be reflected in developing proposals which are relevant for the group.”
The backlash came after Weir predicted that cost-cutting will overcome the anaemic oil and gas market during the first half of this year, with profits “slightly ahead” of expectations.
The company, which makes pumps and valves used in drilling rigs and mining equipment, said like-for-like orders fell by 22 per cent in the first quarter. The decline was led by a 47 per cent slump in its oil and gas division, which has suffered as low crude prices have rendered an estimated 70 per cent of the North American fracking fleet idle.
But the group’s minerals division put in a “resilient” performance, with more original equipment orders than had been expected. Weir also achieved a further £10 million in annualised cost savings during the period, bringing the total to £160m during the past 18 months.
With markets set to remain challenging, chief executive Keith Cochrane said the firm will maintain its concentration on strong cash generation and aggressive cost control.
“The group remains focused on cost reduction measures which have helped to deliver first quarter profits slightly ahead of our expectations,” Cochrane said.
“As a result, we expect first-half profits to be slightly ahead of market expectations. Our full-year expectations remain unchanged, reflecting the slower recovery now anticipated in oil and gas markets.”
Drilling activity in all regions where Weir operates remains sluggish, despite limited improvements in oil prices so far this year. Outside North America, the rig count has fallen by 10 per cent to lows last seen in 2009.
Within North America the US land rig count has declined by nearly 20 per cent during the last two months, with expectations for a 46 per cent reduction in wells drilled during 2016. This has led to pricing pressure which pushed operating margins “slightly” below break-even during the first quarter.