Wm Morrison Supermarkets is the latest blue-chip company to find itself in the firing line over bosses’ pandemic payouts after removing the £290m cost of dealing with COVID-19 before calculating executive bonuses.
Sky News has learnt that the UK’s third-biggest grocer by market value is facing a big protest vote at its annual meeting next month over a multimillion pound award to David Potts, the company’s chief executive.
Several proxy advisers, including Institutional Shareholder Services (ISS), have urged investors to vote against Morrison’s remuneration report because its boardroom committee used discretion to override the exceptional costs incurred by the coronavirus crisis.
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Annual profits slumped to £201m last year. Pic: Morrisons
City sources said, however, that a number of leading shareholders would support the supermarket chain’s board because of the “competent” job that Mr Potts and his colleagues had done managing the business through the “unprecedented” period.
Mr Potts received an immediate cash bonus of £850,000 alongside a deferred award of the same size.
He was also handed restricted stock worth almost £1.4m, 20% of which was calculated using an earnings-per-share metric that would not have otherwise paid out.
In a report to clients, ISS said the same principle applied to the 50% portion of Mr Potts’ annual bonus determined by a profit-before-tax measure.
Morrisons saw annual profits slump to £201m last year, having decided – along with other big supermarkets – to hand back £230m in business rates relief to the government.
The Yorkshire-based company has enjoyed a strong turnaround under Mr Potts and his chairman, Andy Higginson, both of whom had long careers at Tesco.
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2017: Morrisons boss: How shopping’s changing
A Morrisons spokesman said on Friday: “The [remuneration] committee felt that having been instructed to feed the nation – and in doing so endured a year of effort like no other – management and all store managers should not be penalised for their outstanding performance or for taking the steps necessary to protect colleagues and recognise their hard work.”
One insider pointed out that Mr Potts had waived a pay rise for the fifth year running, while the average bonus for thousands of shopworkers had been tripled to reflect their hard work during the pandemic.
They added that both Mr Potts and Trevor Strain, Morrison’s chief operating officer, had both waived 20% of their bonuses two years ago when they did not believe the performance of the business warranted it.
“Our staff had their full bonus paid early and we were the first supermarket to pay £10-an-hour [to all workers], alongside which there were discounts for NHS employees, teachers and emergency services workers,” the source said.
“We have been fair and responsible with everyone.”
Last year rival Tesco suffered an investor revolt
Another Morrisons insider said that even though LTIP options had been adversely affected by COVID-related cashflow numbers, there had been no upward adjustment to bosses’ pay.
Morrisons is not the only supermarket chain to face unrest over executive pay.
Last year, Tesco suffered an investor revolt after removing Ocado from the list of peers on which it based its performance for remuneration purposes.
Executive pay has become a major flashpoint again this year as institutional shareholders have sought to clamp down on what they view as egregious rewards during the pandemic.
FTSE-100 companies including BAE Systems, London Stock Exchange Group and Rio Tinto have all seen big protests.
Sky News revealed this week that Legal & General Investment Management, one of the City’s most influential investors, planned to vote against pay – and the directors responsible for awarding it – at two more companies, Arrow Global and Informa.