Redrow board acknowledges shareholder concerns over chairman and bonuses
The board of housebuilder Redrow has acknowledged a shareholder revolt at its annual general meeting this morning over the re-appointment of chairman John Tutte, and bonus payments (long term investment plans) for executives.
A backlash was predicted ahead of the AGM after investor advisory groups had recommended protests over the contentious resolutions.
They involved former chief executive John Tutte, who has replaced the group’s founder and former chairman, Steve Morgan, who retired, and executive bonuses.
Critics say that because Tutte, who was paid £1.9m last year, was previously chief executive of Redrow, he is not sufficiently ‘independent’ to oversee governance of the firm.
They also disagreed with Redrow for lowering earnings targets that executives, including Steve Morgan, must hit to achieve bonus payments.
Most of the 15 resolutions were passed by margins of between 95.38% and 100%.
But approval for John Tutte’s re-election dropped to 68.62%, while the directors’ remuneration resolution only attracted 69.61% support.
The Redrow board responded, saying: “At the time of John Tutte’s appointment, the board recognised that it was not considered best practice to appoint a chief executive to the role of executive chairman.
“However, as more fully explained in the company’s annual report, the board believed, and continues to believe, that circumstances necessitated continuity and that John’s appointment was, therefore, in the best interests of the company.
“Moreover, following Steve Morgan’s retirement in March 2019, John’s appointment allows for an eventual transition to a more conventional board structure.”
It added: “The board will keep the current arrangements under review and will continue to discuss them with shareholders.”
Regarding the row over directors’ remuneration, it said: “The board understands that the 2020 LTIP (long term incentive plan) award – which has targets below those set for the 2019 award – and the LTIP payment made to Steve Morgan are the key contributing factors to the votes against this resolution.
“The board is satisfied that the targets are appropriate taking into account the challenges the business faces, including from the planned changes to the Help to Buy scheme in April 2021, and strike the right balance between ambition and deliverability.”
The board added: “Steve Morgan’s LTIP award that vested in September 2019, was pro-rated to reflect his length of service up until his leaving at the end of March 2019 rather than the shortened period of time he was in service as an executive having transitioned to non-executive in October 2017.
“Steve’s transition in October 2017 was not a leaving event, and as such, when he retired in March 2019 he was treated as a ‘good leaver’ under the scheme.
“This approach was consistent with that applied for the award made to him that vested in September 2018 when shareholders voted 99.35% in favour of the resolution.”
The board said it will review future LTIP targets, measures and rules as part of the forthcoming review of the company’s remuneration policy that will be subject to shareholder approval in 2020 and, as with resolution three, concerning Mr Tutte, the board will continue its dialogue with shareholders in relation to these matters.
It said: “We appreciate and thank our shareholders for the constructive feedback we have received.”