Steiner's £15m Bonus Sparks Rebellion
Ocado's chief executive, Tim Steiner, is facing a significant investor revolt over a £15m bonus scheme, with influential shareholder advisory groups recommending that investors vote against the pay plan at the company's annual general meeting (AGM) next month. The payout, which is part of a long-term incentive plan, has drawn criticism from Glass Lewis and ISS, two major proxy advisers, who argue that the targets were too easy and the rewards excessive given the company's recent performance.
Details of the Bonus Scheme
The bonus, awarded under the Ocado Group's Long-Term Incentive Plan (LTIP), is tied to the company's share price performance and other metrics. According to the company's remuneration report, Steiner could receive up to £15m if all targets are met. However, critics point out that Ocado's share price has fallen by more than 60% over the past three years, and the company has yet to turn a profit despite years of investment. The advisory groups have described the targets as "undemanding" and have called for a more rigorous alignment with shareholder returns.
Investor Advisory Groups Weigh In
Glass Lewis stated in its report: "The LTIP awards for the CEO appear to lack sufficient stretch, particularly given the company's historical share price performance and ongoing profitability challenges. We recommend shareholders vote against the remuneration report." ISS echoed this sentiment, noting that the bonus structure does not adequately reflect the company's financial health or market conditions. The recommendations are likely to influence major institutional investors, many of whom rely on these advisers for voting decisions.
Ocado's Defense
Ocado has defended the pay package, arguing that it is designed to retain top talent and incentivize long-term value creation. A spokesperson for the company said: "The LTIP is structured to reward the delivery of ambitious strategic goals that will drive sustainable growth. Tim Steiner has led the company through a period of significant transformation, and the awards reflect the board's confidence in his leadership." However, the company has faced backlash from some shareholders who feel that the pay is out of step with the company's financial performance.
Broader Context of Executive Pay
The controversy comes amid growing scrutiny of executive pay in the UK, particularly at companies where performance has lagged. The High Pay Centre, a think tank, has called for tighter regulation of bonus schemes, arguing that they often reward executives for outcomes that are not directly linked to their efforts. According to the centre, the average CEO-to-worker pay ratio at FTSE 100 companies was 79:1 in 2024, up from 47:1 a decade earlier. The Ocado case highlights the tension between rewarding leadership and ensuring that pay is justified by performance.
What Happens Next
The AGM, scheduled for July 15, will see shareholders vote on the remuneration report. While the vote is advisory, a significant 'no' vote would be a major embarrassment for the board and could prompt a review of the pay policy. In a similar case last year, shareholders at BP voted against the CEO's pay package, leading to changes in the company's remuneration structure. The outcome at Ocado will be closely watched as a bellwether for investor sentiment on executive compensation.
