Directors' remuneration a sticking point for Safestore Holdings and Impax

As the 2023 AGM season gets underway, remuneration continues to be a hot topic. Since January 1 2023, there have been four significant no votes against the directors’ remuneration report. On 9 February 2023, 29% of shareholders voted against the report at Compass Group’s AGM on 9 February 2023. Similarly, 30% of shareholders voted against the report at Paragon Banking Group’s AGM on 1 March 2023. Premium listed storage management company, Safestore Holdings plc (Safestore) and AIM listed, Impax Asset Management Group plc (Impax) were both challenged by shareholders on directors' remuneration in the same week. Safestore’s AGM on March 15 2023, 25% of shareholders voted against approval of the directors’ remuneration report, while the same resolution at Impax’s AGM on March 16 2023 saw 21% of shareholders vote against it.

Directors’ remuneration has caused problems for Safestore for some time. Activist investors have opposed the report in AGMs since 2017, following the introduction of a remuneration policy which continues to be a divisive point for shareholders. Safestore backtracked on a controversial £9.4m bonus deal for directors in 2017 a day before its AGM was held. Despite withdrawing the controversial 2017 policy, it is understood that the shareholders who voted against the 2017 remuneration policy have since adopted a policy to vote against all future remuneration reports that reflect its subsequent execution (see: Safestore’s 2017 remuneration policy casts a long shadow of dissent). In the 2018 AGM, the year after the 2017 controversy, the remuneration report narrowly scraped through, with 48% of investors opposing the report. This dropped to 29% against the remuneration report in 2019. Notwithstanding some stability during the height of the pandemic, the company’s 2022 AGM saw 27% of votes cast against the report.

Despite the contention with activist shareholders, Safestore has recorded solid performance in the face of the economic vulnerabilities caused by the pandemic, cost of living crisis, and the general inflationary climate, with its share price generally increasing over a five-year period. In Safestore’s 2023 annual report, the company remained adamant that while the remuneration report mirrors elements of the 2017 policy, it is ultimately justified due to overall company performance.

Safestore acknowledged the dissent in its AGM results, while highlighting its attempts to engage with investors and noting that the remuneration policy proposed in 2020 had received widespread approval:

‘Whilst we received strong support for the Directors’ Remuneration Report (Resolution 2), it was only at 74.66%. The Board appreciates that the 2017 Remuneration Policy continues to divide opinion amongst some shareholders, even though it was voted through in 2017. Shareholder engagement indicates that some shareholders who voted against the 2017 Remuneration Policy at its inception, have a policy to vote against all future remuneration reports that reflect the subsequent execution of it. From specific conversations with some of our leading shareholders they have confirmed that their vote against the Remuneration Report does not reflect a vote against either the management or the Board and that they accept fully that the payouts reflect the outstanding value creation for all shareholders over the past five years which has been a significant benefit to all our stakeholders. As such, this vote does not represent a vote against Safestore’s current Remuneration Policy, which received over-whelming shareholder approval at Safestore’s 2020 Annual General Meeting.’

As it stands, Safestore awards directors’ a maximum annual bonus of 150% of their salary and a long-term incentive plan of up to 200% of their salary per annum. Regardless, the 2017 remuneration policy has been a preoccupation for shareholders. Safestore has confirmed that it is seeking shareholder input on its 2023 remuneration policy proposals, which is expected to be presented to shareholders at a general meeting later in the year.

The asset management specialist, Impax, was also hit with shareholder rebellion on its directors’ remuneration report, which outlines an executive bonus package of around £1.8m. Impax acknowledged the dissent in its AGM results noting that:

‘Impax is committed to enhancing its corporate governance practices, and notes that while the non binding resolution to approve the Directors’ Remuneration Report was passed, the Directors are mindful of the votes against and withheld.’

The company also faced shareholder dissent in its 2022 AGM, which saw 23% of shareholders express opposition to the directors’ remuneration report. It appears Impax’s shareholders continue to oppose remuneration despite a successful and profitable few years for the company which saw share prices increase by 405% over a five-year period.

Impax acknowledged the dissent in its 2022 annual report, noting that:

‘The extent of our disclosures last year fell short of the expectations of some shareholders. For this year’s Report, following engagement with shareholders and advisers, we have increased disclosure of the Company’s variable remuneration structure and outcomes, adding context on how pay outcomes are determined, and as a result, explaining the link between the Company’s strategy and performance and individual reward.’

 Impax seems to have taken steps towards addressing shareholder concerns about variable remuneration as a result of this feedback, commenting in its response to the 2023 voting results:

‘Building on feedback from shareholders we have increased our disclosures around variable remuneration in this year’s report. We intend to develop this disclosure by publishing further details on the Executive Directors’ objectives as our approach to variable remuneration continues to evolve.’

Impax’s increased disclosures included an outline of its new two-tiered approach to directors’ remuneration in the most recent annual report. Directors’ performance is to be scored against in the categories of ‘Business & Functional’ and ‘Collaboration & Culture’. While there have been slight changes to the remuneration report from the previous year, the 45% cap on adjusted operating profits available for distribution in executive bonuses and the Restricted Share Scheme and Long-Term Option Plan has been retained. The company also  emphasised that the Impax remuneration council discloses more than is market standard for AIM companies. However, this attempt to preempt shareholder dissent did not adequately quell votes against the remuneration report.

Market Tracker expected directors' remuneration to continue to be a hot topic throughout the 2023 season. As mentioned, Paragon Banking Group and Compass Group were hit with similar rebellions during 2023 AGMs (see: Paragon Banking Group plc sees significant no vote against remuneration), while easyJet also reported high levels of dissent over remuneration in its recent AGM (see: easyJet plc narrowly avoids significant no vote on executive remuneration). This 2023 trend continues the voting patterns in 2022, where directors’ remuneration reports accounted for 28% of significant no votes and 21% of failed resolutions in FTSE 350 companies in 2022.  For more on the breakdown of voting in the 2022 AGM season, see our recent trend report: AGM update 2022/23.

Market Tracker will continue to monitor shareholder voting patterns throughout the 2023 season.