Advisers oppose Transfield chief's pay
Proxy adviser ISS has told clients plans by Transfield to award the chief executive, Graham Hunt, a "success fee" has no rationale, and should be opposed.
The matter is to be considered by shareholders at the company's annual meeting later this week.
When Mr Hunt was appointed early this year, he was awarded the right to be granted up to 840,700 shares in respect of the financial year to June 30, a further $1.5 million of shares for fiscal 2014 and a deferred success fee of up to another 235,900 shares.
ISS told clients the "success fee" is not appropriate given the company's continued poor performance in fiscal 2013.
As well, shareholders have not been given sufficient information on specific performance targets to justify the payment, and the value of the award is "not consistent with market cap peers".
In the year to June, Mr Hunt received a total remuneration of $1.86 million, which includes $420,750 in short-term incentives, being part of the package of shares to be voted on at the meeting.
Another investor adviser, CGI Glass Lewis, has told clients Mr Hunt's fixed pay of $1.5 million is "approximately 46 per cent higher than the median for total fixed remuneration of the company's index cap peers in financial year 2013".
It said it "views high fixed remuneration with scepticism, as such remuneration is not directly linked to performance and may serve as a crutch when performance has fallen below expectations".
"In our view the large incentive-based pay is largely the result of high fixed remuneration as it has a compounding effect on the amount of short and long-term incentives granted to an executive, since such awards are granted as a fixed percentage of fixed remuneration."
Transfield has failed to "provide a thorough and convincing explanation for such high fixed remuneration", it told clients.
Frequently Asked Questions about this Article…
Advisory companies are opposing the high pay of Transfield Services' chief executive because they believe the 'success fee' lacks rationale, especially given the company's poor performance in fiscal 2013. They also feel that shareholders haven't been provided with enough information on performance targets to justify the payment.
The 'success fee' refers to a deferred award of up to 235,900 shares for Transfield's CEO, Graham Hunt. This is in addition to other share awards and incentives, but it has been criticized for not being justified by the company's performance.
Graham Hunt's fixed pay of $1.5 million is approximately 46% higher than the median for total fixed remuneration of the company's index cap peers in the financial year 2013, according to CGI Glass Lewis.
Investors are concerned that high fixed remuneration is not directly linked to performance and may act as a crutch when performance falls below expectations. It can also lead to larger incentive-based pay due to its compounding effect on short and long-term incentives.
In the year to June, Graham Hunt received a total remuneration of $1.86 million, which includes $420,750 in short-term incentives as part of the share package to be voted on at the meeting.
Proxy adviser ISS has advised its clients to oppose the plans to award Transfield's CEO a 'success fee,' arguing that it is inappropriate given the company's poor performance and lack of sufficient information on performance targets.
The value of the CEO's award is considered inconsistent with market cap peers because it does not align with the company's performance and lacks a convincing explanation for such high fixed remuneration.
The upcoming shareholder meeting is significant because it will consider the plans to award the CEO a 'success fee' and other share packages, which have been met with opposition from advisory companies due to concerns over the company's performance and remuneration practices.
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