Pressure on Stockland over pay

THE diversified property developer Stockland has had the blowtorch applied by shareholders over its remuneration report, with close to 11 per cent of investors registering disapproval yesterday.

By InvestSMART · 26 Oct 2011

By InvestSMART ·
26 Oct 2011

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THE diversified property developer Stockland has had the blowtorch applied by shareholders over its remuneration report, with close to 11 per cent of investors registering disapproval yesterday.

Its chairman, Graham Bradley, said at the annual meeting in Sydney the 89 per cent approval rate was consistent with the previous year's tally and it had the support of proxy agencies CGI Glass Lewis and Institutional Shareholder Services. Stockland had been a strong performer in its peer group, Mr Bradley said.

But that did not appease the Australian Shareholders' Association, which voted in the negative.

"Being the best among a bunch of losers is nothing to be proud of," the association's John Balmain said. "We recommend against the adoption of the remuneration report as it contravenes our policies in many areas."

Attacks on executive remuneration is set to be the dominant feature of annual meetings this season and the association has vowed to keep up the pressure.

Mr Bradley said in his chairman's address that Stockland had been undertaking a comprehensive review of its pay structures and planned to announce the full outcome once the review was complete. In the year to June 30, the managing director of Stockland, Matthew Quinn, was paid a total package of $5.7 million due to a rise in short- and long-term incentives.

"Our executives must achieve stretching goals - goals set above the level we are confident of achieving - in order to earn short- and long-term incentives," Mr Bradley said.

"We have announced the earnings per security target we have set for incentive purposes. At 6 per cent, this target is well above our market guidance and represents a genuine stretch. We believe that, given the headwinds our sector faces, this target will be challenging for our executives to achieve."

In his speech, Mr Quinn said he was confident the company's "three R" strategy - focusing on residential, retail and retirement properties - would deliver good returns to shareholders.

He identified a $200 million increase in asset sales to about $600 million across the non-core office and industrial properties, with the funds going to the present share buyback and the core businesses.

For the three months to September 30, Stockland received a total of 1092 deposits in residential communities, up on the 890 deposits in October last year.

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Frequently Asked Questions about this Article…

What happened at Stockland's annual meeting over the remuneration report?

At Stockland's annual meeting shareholders voted on the company's remuneration report with close to 11% registering disapproval and about 89% approval. Proxy agencies CGI Glass Lewis and Institutional Shareholder Services supported the report, while the Australian Shareholders' Association (ASA) voted against it.

Why did some investors and the ASA oppose Stockland's executive pay?

The ASA said Stockland's remuneration contravened its policies in several areas and criticised the level of pay, saying "being the best among a bunch of losers is nothing to be proud of." Broader investor scrutiny of executive remuneration is a growing theme at annual meetings this season, and the ASA has vowed to keep up pressure.

How much was Stockland's managing director Matthew Quinn paid last year?

In the year to June 30, Stockland's managing director Matthew Quinn received a total package of $5.7 million, largely driven by increases in short- and long-term incentives.

Is Stockland reviewing its executive pay structures?

Yes. Chairman Graham Bradley said Stockland is undertaking a comprehensive review of its pay structures and will announce the full outcome once the review is complete. He also emphasised that executives must meet stretching goals to earn incentives.

What performance targets does Stockland use for incentive pay?

Stockland has set an earnings per security (EPS) target of 6% for incentive purposes. The company says this target is above its market guidance, represents a genuine stretch, and will be challenging given sector headwinds.

What is Stockland's 'three R' strategy and how does it relate to shareholder returns?

Stockland's 'three R' strategy focuses on residential, retail and retirement properties. Managing director Matthew Quinn said the strategy is expected to deliver good returns to shareholders by concentrating on these core areas.

What asset sales and buyback plans did Stockland announce?

Stockland identified a $200 million increase in asset sales to about $600 million across non-core office and industrial properties. The proceeds are intended to support the company's current share buyback and to be redeployed into its core businesses.

How is Stockland's residential sales activity performing recently?

For the three months to September 30, Stockland received 1,092 deposits in residential communities, up from 890 deposits in the comparable period last year, indicating an improvement in residential sales activity.