THE chief executive of transport firm FirstGroup yesterday intervened directly for the first time in the dispute with rebel shareholder Tom Sandell, saying his criticism of the company’s performance and pay policy did not stand up to scrutiny.
He said it was for others to decide on his pay and that there were “a lot of things to be proud of” about the company’s performance.
O’Toole revealed that John McFarlane, the company’s chairman, intends to write to Sandell, founder and chief executive of New York hedge fund Sandell Asset Management, in response to an open letter that Sandell sent to McFarlane this week.
Sandell, whose company owns 3.1 per cent of FirstGroup, said O’Toole was paid more than other transport chiefs while shareholder returns from the Aberdeen-based bus and train operator have fallen 8 per cent in the past five years. This compares with a 231 per cent increase for its peer group, which includes Go-Ahead, National Express, Stagecoach and Student Transportation of America.
O’Toole saw his total pay package almost double to £2 million last year – a period that saw FirstGroup launch a deeply-discounted rights issue to defend its credit rating.
Sandell said: “We are strong believers in pay for performance. We simply do not believe that a 94 per cent rise in remuneration package is deserved for Mr O’Toole’s 2013-14 performance.”
He has called for the company to sell its US assets and has raised concerns in his letter about a lack of sector expertise on the group’s board.
O’Toole, who was in Scotland for the launch of a report on the impact of First ScotRail on the tourism industry, defended the strategy, including its decision to retain its US assets. “There is a lot to be proud of,” he said.
“The current plan to build the business offers the greatest option for shareholders. We have look at all the alternatives and test them against market opportunities but we have not seen anything that is superior to our current approach,” he said. “Therefore his [Sandell’s] ideas do not withstand scrutiny.”
He said it was important to “maintain a dialogue” with shareholders and that Sandell would receive a response from the chairman explaining the company’s preferred options.
The company has defended O’Toole’s total package as being a result of the vesting of a “retention award” of £324,000 granted in 2011 and a bonus of about £600,000.
His basic pay was frozen at £846,000 a year for three years and he declined a bonus in the past two years.
O’Toole said yesterday that his compensation was a matter for the remuneration committee, which “follows a formula approved by the shareholders”. He added: “It would be unseemly for me to be talking about my compensation. It is for others to decide.”
When asked if he felt he was fairly compensated, O’Toole replied: “I continue to work here, so yes.”
Commenting on figures from the Fraser of Allander Institute showing the scale of ScotRail’s contribution to Scottish tourism, he said it helped in discussions about future transport planning.
The report says ScotRail adds £1.22 billion to the country’s gross domestic product.