Burberry faces revolt over £20m pay deal for chief executive
Burberry is facing a shareholder revolt over a £20m pay deal for its controversial chief executive Christopher Bailey.
The Investment Management Association, which has taken over responsibility for the Association of British Insurers’ investment affairs, has issued an “amber top” alert on Burberry’s pay policies, ahead of the retailer’s annual meeting on Friday. This is the association’s second-most serious level of censure on corporate governance matters.
Mr Bailey, the luxury brand’s longstanding creative director, was elevated to the role of chief executive in October, when Angela Ahrendts quit to join Apple. The move raised concerns among some investors over the breadth of his role at the helm of one of Britain’s biggest retailers. He continues to hold the roles of chief executive and chief creative officer.
Investors are meanwhile unhappy about share awards granted before Mr Bailey became chief executive.
In 2010, he was awarded 350,000 shares, and a further 1m in July 2013 – together worth about £20m at Burberry’s current share price. These will vest between 2015 and 2018, regardless of performance.
The warning comes as shareholder step up their opposition to what they regard as excessive rewards. Last week, a bonus for Mike Ashley, the billionaire founder of Sports Direct, was approved despite a sizeable shareholder revolt.
The past few months have also seen several other high-profile pay revolts at FTSE 100 companies, including Barclays, AstraZeneca, HSBC and Pearson, which owns the Financial Times.
Depending on performance, Mr Bailey’s package in his new role could be up to £10m.
Under the terms of his contract, Mr Bailey receives £1.1m annually, and can obtain 200 per cent of salary in a performance-related bonus. He also receives a pension contribution of 30 per cent of his salary, and a £440,000 cash allowance. Burberry will not break out the components of this, but it does not include allowances for clothing or a car.
On becoming chief executive, Mr Bailey also received a one-off award of 500,000 shares, worth about £7.3m, and vesting in 2017, 2018 and 2019, depending on performance targets.
People close to the situation stressed that Mr Bailey’s remuneration was on a par with creative heads at other global luxury fashion groups, and that Burberry’s pay also reflected the performance of the company.
Ms Ahrendts, who with Mr Bailey is credited with elevating Burberry to a global luxury brand and propelling it into the blue-chip FTSE 100 index, was also one of Britain’s best paid executives. She took home £16.9m in 2012 – more than any other chief executive on the FTSE 100.