Shareholders in Crest Nicholson, one of the largest housebuilders in Britain, have voted against a pay deal for the company’s directors because of concerns that the performance targets were too easy.
The rebellion means Crest Nicholson is the first major company this year to see investors reject its remuneration report, which is a major embarrassment.
More than 58% of votes cast by shareholders at Crest Nicholson’s annual meeting on Thursday were against the pay deal.
The housebuilder said after the meeting that it still planned to pay out the controversial bonuses at the centre of the pay row.
The vote against the remuneration report is symbolic and non-binding, with investors approving the remuneration policy – which sets the broad approach to pay for the next three years and is a binding vote.
However, other companies, notably Thomas Cook and defence group Chemring, have changed their pay deals after smaller rebellions from shareholders.
The pay deal was rejected after Institutional Shareholder Services (ISS), the influential advisory body, urged investors to vote against it before the meeting because it said the profit target that Crest Nicholson had to reach to trigger the bonus payments was too easy.
ISS said the profit target had been lowered “without any compelling rationale provided by the company”.
Crest Nicholson’s remuneration report outlined further plans to cut the target for pre-tax profit growth from 16%-20% a year ago to 5%-8% for the 2017 to 2019 period, citing challenging trading conditions. The target had already been cut from the 18%-22% in 2015.
If the company hits the target, then chief executive Stephen Stone will receive a share bonus worth almost £812,000 on top of his salary of £541,158 and cash bonuses, while chief operating officer Patrick Bergin could collect £562,500 on top of his £375,000 salary.
Standard Life Investments, Crest Nicholson’s second biggest shareholder, confirmed it voted against the remuneration report.
It said: “We were disappointed that the company chose to substantially reduce the profit range at which incentives for management were paid, without consulting shareholders. As a result, we voted against the remuneration report.”
Crest Nicholson said it was “disappointed” with the vote and said the performance targets for the share awards, which also includes a measure on the returns made from money spent by the company, were “sufficiently stretching”.
It added: “Every year, we have a regular dialogue with leading shareholders on a range of matters including remuneration.
“During the course of this year, we will continue this engagement with shareholders and will discuss remuneration arrangements and next year’s long-term incentive plan targets, and seek to better communicate underlying rationale to shareholders with earlier engagement.”
It is rare for shareholders to reject a company’s remuneration report. Last year, shareholders voted against a £14m pay package for the chief executive of BP and the remuneration report of Smith & Nephew, the medical equipment group.
Chris Cummings, chief executive of the Investment Association, which represents shareholders, warned earlier this month that companies could face rebellions at this year’s annual meetings.
He said: “As the starting gun is fired on this year’s AGM season, businesses around the UK would do well to heed the lessons from Brexit.
“Too many people still feel they are not sharing in this country’s prosperity. Companies can either act responsibly now and shape a more responsible 21st-century corporate Britain or they can carry on as before and have it foisted upon them.”
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