Quarter of GKN owner Melrose shareholders revolt against pay report

Shareholders in turnaround specialist Melrose have staged one of the largest pay revolts this year, amid disgruntlement over a decision to pay a £42m bonus to each of four directors.

Nearly 26% of Melrose shareholders who voted at the firm’s annual meeting on Thursday failed to back its pay report, with leading City institution and top 20 shareholder Standard Life Aberdeen among the rebels.

The protest extends a series of recent clashes between UK companies and investors that has resulted in bloody noses at Unilever and housebuilder Persimmon and forced satellite firm Inmarsat to rewrite its pay plans.

The revolt at Melrose comes too late to stop the £42m bonus payments, which investors approved in previous years. Nor will the vote affect directors’ current pay packets, because rules giving shareholders the power to block remuneration deals require opposition from more than 50% of voting investors.

But it will be seen as a rap on the knuckles for a decision to hand out £167m to just four men – executive chairman Christopher Miller, executive vice-chairman David Roper, chief executive Simon Peckham, and group finance director Geoffrey Martin.

Melrose said after the vote that it would “review the existing […] remuneration arrangements”.

But a source close to the company pointed out that shareholders agreed to the long-term incentive plan in 2012, adding that new opposition may have come partly from former shareholders in GKN, the engineering firm Melrose bought earlier this year for £8bn.

Melrose’s business model involves buying companies it believes are being run inefficiently and stripping out costs, before selling all or part of the business for a profit.

The strategy has led to the company being accused of “asset-stripping”, most recently by political opponents of the GKN deal.

Melrose said it delivered returns of £3.6bn to investors between 2012 and 2017 via a string of takeovers that also triggered large windfalls for directors, in contrast to the more conventional pay scheme that long-time GKN investors are used to.

As Melrose faced down investors, insurer Aviva came under fire from small shareholders over executive pay.

The firm has pledged to make £14m of goodwill payments to people who lost money by selling its shares after it announced that it could cancel preference shares, triggering a sharp share price drop. Aviva then scrapped the plans, but its handling of the issue has drawn scrutiny from the City watchdog and investors, one of whom described the goodwill payments as “flimsy and patronising fudge”, demanding that directors hand back bonuses.

Earlier this month, a revolt from more than 60% of voting investors forced satellite firm Inmarsat to rip up its pay proposals, continuing a long-running dispute that had broken out into rebellion three times in the past six years.

More than a third of investors in Unilever registered opposition to its pay plans earlier this month, while housebuilder Persimmon suffered a revolt against the “grossly excessive” £75m bonus handed to chief executive, Jeff Fairburn.

The payout was ultimately approved because nearly a third of shareholders abstained and of those who voted, 51.5% cast in favour and 48.5% against.

Binding votes on pay were introduced by former business minister Vince Cable in 2013, after the so-called Shareholder spring of 2012, when investors lodged protests against executive pay packets that they saw as excessive.