RE: Shares2 Jul 2020 21:29
SIG faces shareholder revolt over chief’s one-off payout
Proposed £375,000 payment for ‘compelling new strategy’ despite stock price tumble
SIG supplies building materials such as roofing and insulation. The company issued a profit warning in January © PA
UK building materials group SIG is on course for a shareholder rebellion next week after proposing a one-off £375,000 payment for its chief executive despite a large fall in its share price.
Three big investors and four shareholder advisory groups have raised concerns about the payment, which SIG has said will only be made with shareholder approval, ahead of an extraordinary general meeting next week.
The company proposed the payment for Steve Francis, who joined SIG in February as interim chief executive, after he developed a “compelling new strategy” including a £165m capital raising backed by private equity investor CD&R.
But proxy advisers Institutional Shareholder Services, Glass Lewis and Pirc have recommended shareholders vote against it, while the Investment Association’s Ivis voting service, which is widely used by big UK investors, has “red flagged” the payment, its highest level of warning.
One UK asset manager said the payout was unjustified, adding that while the share price had recovered somewhat it was still half of its level in late February. “It's definitely an against from us. I suspect this might actually get voted down,” he added.
A top 15 shareholder said he would vote against the payout, which was also conditional on the completion of SIG’s capital raising.
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A revolt would be a big blow to the company. SIG, which is part of the FTSE 250, said it was “firmly of the view that this payment is fully justified” and that it would not cancel the vote.
Mr Francis took charge after the company’s board ousted its former chief executive and chief financial officer in the wake of a profit warning in January that knocked more than 20 per cent off its share price. Since his appointment, the share price has fallen further from 65.96 to 30.00.
The proposed payout to Mr Francis — who was previously drafted in to restructure Patisserie Valerie after an accounting fraud — is a vote of confidence in his ability to turn SIG around and “a bit of a sweetener for having got through the [capital] raise,” said Aynsley Lammin, an analyst at Canaccord Genuity.
Pirc said that the payment “appears to be associated with his involvement in the capital raise, and his continued employment”, but argued these functions were a normal part of the CEO’s job.
Glass Lewis said it was “sceptical of any type of extra bonus that rewards individuals for actions that we view as intrinsic to an executive's duties”.
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