Our views

Weir tests shareholder mood for simpler pay schemes


Ashley Hamilton Claxton, Head of Responsible Investment

24 April 2018

As a firm which has historically seen significant levels of shareholder unrest about its pay structure, Weir’s second attempt to adopt an alternative executive pay scheme this year will be an interesting test of how investors view the introduction of new, simpler remuneration plans. 
Known as Restricted Share Awards, these new plans are easier for investors to understand as they link payments to long-term share prices rather than a set of complicated, pre-determined performance conditions. 
In the case of Weir, the board has halved the value of the share grants for the CEO and CFO under this new scheme. In addition, thanks to an extended holding period after the awards vest, directors will have to wait a full five years before they can cash in the first tranche of any share award.
Given the simple and straightforward structure and the long-term nature of this new scheme, we’ll be voting for Weir’s new pay policy at their Annual General Meeting (AGM) this week.
It is the first time we have supported a Restricted Share Award since adopting a new set of guidelines which set out our expectations for companies that choose to adopt alternative models of pay.
Because restricted share schemes offer executives a lot more certainty, we’re looking for companies to significantly cut the value being granted to executives by at least half. In addition, we’re expecting to see an increase in the amount of time that directors have to hold on to these awards before they can cash them in, through extended vesting and holding periods. 
We think boards should apply an underpin or assess executive performance before they grant the shares, to guard against big pay outs for poor performance. Most importantly we’re expecting remuneration committees to use their discretion appropriately and adjust the awards if necessary. We will be willing to vote against remuneration committee directors if we believe they’ve missed a chance to apply this discretion.

As a firm which has historically seen significant levels of shareholder unrest about its pay structure, Weir’s second attempt to adopt an alternative executive pay scheme this year will be an interesting test of how investors view the introduction of new, simpler remuneration plans. 

Known as Restricted Share Awards, these new plans are easier for investors to understand as they link payments to long-term share prices rather than a set of complicated, pre-determined performance conditions. 

In the case of Weir, the board has halved the value of the share grants for the CEO and CFO under this new scheme. In addition, thanks to an extended holding period after the awards vest, directors will have to wait a full five years before they can cash in the first tranche of any share award.

Given the simple and straightforward structure and the long-term nature of this new scheme, we’ll be voting for Weir’s new pay policy at their Annual General Meeting (AGM) this week.

It is the first time we have supported a Restricted Share Award since adopting a new set of guidelines which set out our expectations for companies that choose to adopt alternative models of pay.

Because restricted share schemes offer executives a lot more certainty, we’re looking for companies to significantly cut the value being granted to executives by at least half. In addition, we’re expecting to see an increase in the amount of time that directors have to hold on to these awards before they can cash them in, through extended vesting and holding periods. 

We think boards should apply an underpin or assess executive performance before they grant the shares, to guard against big pay outs for poor performance. Most importantly we’re expecting remuneration committees to use their discretion appropriately and adjust the awards if necessary. We will be willing to vote against remuneration committee directors if we believe they’ve missed a chance to apply this discretion.

Past performance is no guide to the future. The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.