In light of brewing controversy over Burberry's remuneration plan for Christopher Bailey, the brand's longstanding Chief Creative Officer and newly named CEO (replacing Angela Ahrendts who left the company to head up retail at Apple), the British brand's shareholders have voted to reject it. The plan's most controversial aspects include the “golden hello” in Burberry shares, 500,000 shares in the company, which are worth up to $12.5 million and are slated to begging vesting in 2015, "in consideration for the executive’s appointment to the roll of chief executive" and his $750k+ yearly cash allowance to cover clothing and other items.
The one-off award of 500,000 shares is understood to be subject to performance criteria and will be released between 2017 and 2019. Sources, such as the Guardian, stipulate that large one-time payments are “typically reserved for top executives arriving from other businesses, where their departure caused them to lose out on a performance payout.” Not at issue: Bailey's annual pay package that amounts to nearly $2 million a year, as well as his annual bonus which could be as much as twice his yearly salary.
About 53 percent of shareholders voted against Bailey's remuneration plan at the company’s annual general meeting in London today, Burberry said in a statement. While investors owning 16 percent of the stock opposed the directors’ pay policy and 8.8 percent voted against the executive share plan, the vote is non-binding, which means Burberry does not actually need to alter its pay policy.
The vote comes in the heels of the Investment Management Association's issuance of its second-most serious alert on Burberry’s pay policies. Additionally, Institutional Shareholder Services Inc., the US corporate governance adviser, and Pensions & Investment Research Consultants have also reportedly questioned elements of Bailey’s CEO-related remuneration.
People close to the situation have stressed that Mr Bailey’s remuneration is on a par with creative heads at other global luxury fashion groups, and that Burberry’s pay also reflected the performance of the company. However, other sources suggest (according to the Telegraph) that the $750k+ yearly cash allowance ”is highly unusual for a FTSE 100 [a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization] chief executive.” More to come …