Unilever’s shareholders rejected the company’s plan to pay executive salaries, a blow for the incoming boss Hein Schmacher even before his July start date.
Almost 60% of the votes cast at the FTSE100 company’s annual general meeting on Wednesday were against the remuneration reports. This is a level of revolt that has not been seen in the last 20 years.
Corporate governance experts were critical of Unilever before the vote. They argued that Unilever planned to pay Schumacher EUR1.85mn in base salary, before bonuses. This is almost a fifth higher than Alan Jope’s total remuneration last year, which was EUR5.4mn.
Investors were dismayed by the lacklustre performance of Dove’s soap and Hellmann’s mayonnaise, which was further exacerbated by a botched PS50bn offer for GSK’s Consumer Health business.
Jope, a veteran of 35 years at the company, announced in September he would step aside. Nelson Peltz, an activist investor, targeted the consumer goods company in September.
According to Sarah Wilson of Minerva Analytics’ proxy advisory voting service, the vote against Unilever’s pay plan was one of just 13 rejections of a similar nature at a FTSE100 company since 2000.
Unilever expressed its “disappointment” at the advisory vote and said: “We will continue to engage with shareholders and listen to feedback over the next few month to determine any next steps.”
Glass Lewis and ISS, two shareholder adviser groups, had urged their investors to vote against the pay plan of the company. They were concerned about Schumacher’s salary at his appointment.
ISS stated that the incoming chief’s salary is “significantly higher”. It also said it was significantly higher than Unilever’s UK market competitors and his salary at FrieslandCampina a Dutch dairy cooperative. ISS said Unilever “had not provided compelling justification”.
Glass Lewis stated that it expected new executives to be hired “at a discounted rate relative to their predecessors”, and “any significant pay increases to occur on a gradual basis”.
Fixed remuneration may be used as a crutch if performance falls below expectations.
The company said at the time of Schumacher’s appointment that the plans for the chief executive’s salary were “in accordance with Unilever’s existing remuneration policies” and that “his salary places him at the middle of our benchmark companies”.
Schumacher, who previously worked for HJ Heinz will become Unilever’s chief executive designate at the beginning of next month. He will then assume the role permanently in July, when Jope steps down from the board.
Changes in the top management are occurring sooner than expected. Jope was expected to retire by the end of this year.
Unilever’s largest shareholders include US funds groups BlackRock and Vanguard and Legal and General Investment Management, both in the UK.