Shareholders in Perth-based transport group Stagecoach are being urged to ignore pressure to block a move that allows executives to minimise the tax bill on their bonuses.
Pensions and Investment Research Consultants (Pirc), which advises pension funds and other institutional shareholders, has asked shareholders to vote against the group’s remuneration report at this week’s annual meeting in Perth a stance described by Stagecoach as “bizarre and contradictory.”
Stagecoach’s remuneration committee brought forward the payout date for bonuses to chief executive Sir Brian Souter and finance director Martin Griffiths last year to avoid the introduction of the 50p tax rate. It then recommended an additional payment for the difference caused by the date change.
Pirc says changing the terms for tax reasons runs against its best practice guidelines, as does making up the difference following an adjustment.
However Stagecoach said Pirc’s logic was “absurd” as the arrangements were fully disclosed in the 2010 annual report but Pirc didn’t recommend that shareholders oppose that report.
A Stagecoach Group spokesman explained the move, saying: “In light of the fiscal changes for the 2010-11 tax year, it was deemed appropriate to bring forward the vesting date of the award to March 31 2010 for those UK-based individuals impacted.”
The company said Pirc’s opposition was “unclear, inconsistent and illogical” and it advised shareholders to ignore it. It also pointed out that Pirc was a lone voice, saying: “Other investor bodies, such as the Association of British Insurers, Research Recommendations Electronic Voting and Manifest have not expressed the same concerns as Pirc and we continue to believe this was an appropriate use of the discretion of the remuneration committee.”
Continued…
Sir Brian received £844,000 in total pay and bonuses in the year to April, while Mr Griffiths netted £836,000.
The company hit the headlines last week when it was revealed that investors will benefit from around £340 million being returned to shareholders, which means Sir Brian is in line for a £51 million payout due to his 15.1% shareholding, while his sister Ann Gloag will receive almost £37 million through her lesser stake.
Shareholders will get 47p for each share they hold under the proposals, which the group says will give it a “more appropriate and efficient capital structure” and reduce its cost of capital.
Mr Griffiths said: “The group is in a strong financial position, all of our divisions are continuing to grow, and the outlook for our transport services is positive.”
The group’s last major return of cash to shareholders was in 2007 when it returned around £700 million.
The global nature of Stagecoach Group was illustrated on Monday with an announcement that it has expanded the network run by its budget coach operator megabus.com in the United States and Canada.
The Stagecoach Group annual general meeting will take place in Perth Concert Hall on Friday at noon.