News Column

Bloody nose for Burberry board

July 12, 2014

By Rupert Steiner and Peter Campbell, Daily Mail, London



July 12--Sir John Peace's position as chairman of Burberry was under pressure last night after the firm suffered one of the biggest shareholder rebellions on pay.

Investors have rounded on senior board members, questioning both their independence and effectiveness, after more than half voted against 'obscene' pay awards for its top bosses that include a pounds sterling 20m pay deal for new chief executive Christopher Bailey.

One investor said this was a wake-up call for the firm to beef up its board: 'I think there has been a disconnect between investors and the firm.

'It's the role of the chairman to listen and act and if this does not happen the problem needs to be fixed one way or another.'

Peace's independence as chairman has been questioned because he was previously chief executive of GUS, the former parent company of Burberry. And senior independent director Philip Bowman is no longer considered independent because he has served for more than nine years, which falls foul of governance rules.

Shareholder advisory group Pirc had already warned that 'there is insufficient independent representation on the board' and told investors to vote against the re-appointments of Peace, Bowman and vice chairman David Tyler.

As many as 53pc of votes cast by investors at the firm's annual meeting went against its directors' remuneration report.

The main bone of contention was 1.35m shares awarded to Bailey prior to him taking up his new role as an incentive to stay with the firm after he was made an offer by a rival. The shares, which are not linked to performance, could be worth pounds sterling 20m.

Nick Bubb, an independent retail analyst, said the scale of the revolt was an embarrassment for Peace.

'I am sure Burberry is going to have to speak to investors as it is a pretty big revolt,' he said.

'The big egos in the fashion world can be hard to handle. There was that embarrassing video Peace presented when Bailey was appointed.

'Investors might not have voted him down this year but he needs to be careful about next year.'

Bailey, who was previously chief creative officer and succeeded former boss Angela Ahrendts, is in line to receive up to pounds sterling 10.3m a year in salary, pension, variable bonuses and long-term awards. He is also due to receive shares worth pounds sterling 20m by 2018 under a previous 'golden handcuffs' arrangements with the group in his previous role to prevent him from joining rivals.

Speaking at the annual meeting, Peace said: 'The board took the view that it was essential that we retain Christopher in the business, mindful of the huge value he has created and would create in the future as one of the world's leading fashion designers.

'We achieved this by putting in place a new remuneration package similar to that paid to Angela including allowances and other benefits and granting him a further award of shares which would only vest in full if he remained with the company for a further five year period.'

The Investment Management Association, which advises pension funds on how to vote, had already slapped the company with an embarrassing 'amber' warning over the scale of its pay deals.

Dr Roger Barker, from the Institute Of Directors, said: 'Burberry shareholders have fired a warning shot with today's vote.

'They are clearly not convinced that executive pay at the company has been transparently linked to tough performance targets. The onus in now on the board to urgently engage with shareholders to convince them they are responding to their understandable concerns.'

The company last year enjoyed strong growth, with sales up 17pc to pounds sterling 2.3bn.

But shares have slipped slightly in the last 12 months on fears of slowing economic growth in China. Shares closed 12p lower at 1452p, valuing the fashion house at pounds sterling 6.4bn.

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(c)2014 Daily Mail (London, )

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Source: Daily Mail (London, England)


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