Retail executives will be dismayed at shareholder militancy at the moment. Tesco just managed to push through a change to share options rules, against strong opposition at its AGM. Argos owner Home Retail Group had a similar groundswell against bonus payments to directors at its AGM too.
Both of these companies have been relatively recession-proof, compared to their competitors, so its safe to assume the directors who are eligible for these rewards probably deserve them.
It’s a real indication about how twitchy shareholders are about executive rewards in the retail sector at the moment, even though the banking sector appears to be sliding back towards pre-credit crunch bonus levels.
Dividends in retail shares have been cut, so it may be shareholders are reasoning that if they aren’t getting anything on top of their investments, why should directors get anything either?
The retail industry seems to have a greater than average amount of mavericks on its boards, who like to have a free rein on how they manage their companies. There have been disgruntled noises about good corporate governance being ignored in the make-up of boards in retail in the recent past too.
Now it appears shareholders want retailers to toe the line a bit more and exercise a bit of restraint in the handing out of directors’ rewards.
I can’t feel a great deal of sympathy for retail directors who want to be rewarded with multiples of their salaries for doing their jobs, when so many low-paid shop workers have been put out of work.
Having said that, retailing is a business that requires real talent to ensure success, because of the range of products and sales propositions within the vertical and because to the slim margins retailers operate in.
Mediocre management means business failure in short order in retailing, so it’s easy to see where the talent lies and deft retail executives have to be rewarded if they are going to be retained. The retail sector is a competitive market with lots of potential employers to choose from.
As long as retail bonuses and share options are channelled to directors who have made a real contribution to shareholder value, they should get the appropriate rewards. Still, the recent spate of shareholder revolts are a warning to retail boardrooms to put their houses in order.
(Pic: didbygraham cc2.0)
