By  on July 13, 2014

LONDON — Life under the public shareholders’ microscope might be insufferable for some, but not Christopher Bailey.

Shareholders rejected the Burberry chief executive and chief creative officer’s pay packet at the company’s annual general meeting after a week of negative press reports touting the vote — but that didn’t rattle Bailey a bit.

“I tried not to let the press reports affect what I was doing, and I do think everything needs to be questioned — and transparent,” an upbeat Bailey told WWD following the AGM, where more than 50 percent of votes were against his new multimillion-pound pay package.

The shareholders’ vote, however, was a non-binding one, which means Bailey’s pay — which could reach up to 10.3 million pounds, or $17.6 million, this year — will remain untouched.

Not one shareholder complained about his package during the subdued, hour-long meeting.

The 21 other resolutions, which are binding, and which include Bailey’s election as ceo and Burberry’s new, three-year remuneration policy, passed with large majorities.

During the morning AGM, just four shareholders asked questions, and one even declared: “I salute in advance the new ceo. He is worth every single penny.” Another one asked Bailey when he planned to bring back the heritage Piccadilly trenchcoats. “I’m six-foot-one,” said the shareholder, an older man. “I don’t want to look like a Beckham! I don’t want a [trenchcoat] up to my thighs!”

It was Bailey’s first AGM as a member of the board, and the first time his salary — and other news about him — was revealed. By way of justifying Bailey’s pay, Burberry’s chairman Sir John Peace said a year ago, the company risked losing its top designer.

“A year ago, we were faced with competing job offers for Christopher, which were much higher than his existing package. The board took the view that it was essential that we retain Christopher in the business, mindful of the huge value he has created and would create in the future,” said Peace.

The board’s solution was to put together a pay package for Bailey that was in line with that of Angela Ahrendts, Burberry’s ceo at the time. The package included 1 million shares that will vest between 2015 and 2018, regardless of performance as well as a higher salary and annual allowance.

Those 1 million shares came on top of a further 350,000 shares awarded to Bailey in 2010 that are also unlinked to performance and will also vest between 2015 and 2018. None of that information became public until Bailey took up his role as ceo in May.

The estimated worth of those 1.35 million, non-performance-related shares that Bailey received before he became ceo is 20 million pounds, or $34.2 million at current exchange.

Asked which companies had been courting him, Bailey demurred: “I never wanted to go anywhere. This company is in my blood. I am so committed, and feel so passionate about the future. There is a whole mountain of opportunity.”

Peace didn’t name Bailey’s suitors, but it was clear they were outside the U.K. Earlier this year Ahrendts quit Burberry for Apple Inc., where she received a $68 million share award as a golden hello.

“We know that the amount paid to Christopher is a lot of money, but much of it is performance-related — which he will only receive if Burberry performs strongly,” said Peace during his presentation.

“And we are acutely aware that he could command a much higher package outside of the U.K., where the size and nature of remuneration can be very different, and quite often not publicly disclosed,” he told shareholders.

When he took up the role of ceo, Bailey received a further 500,000 shares as a one-off golden hello. Those shares are performance-based and will vest in three tranches between 2017 and 2019.

Bailey’s annual salary in his dual role is 8.5 million pounds, which includes a bonus, pension and a 440,000 pound allowance, or $754,000, similar to what Ahrendts had received. However, the actual value of Bailey’s pay packet could shoot as high as 10.3 million pounds, if one were to include an annualized chunk of the 500,000 shares.

Shareholder complaints began to surface earlier this month, after the Investment Management Association, a paid-for U.K.-based service that advises financial institutions on how to vote at company meetings, put an “amber top” alert on Burberry’s pay policies.

A spokesman for the organization told WWD the recommendations are nonproscriptive, and aimed only at raising shareholders’ awareness of potentially troublesome issues before they cast their votes. Amber is the second-highest alert below red.

After the results of the vote were revealed, Peace said: “It is disappointing that the advisory vote for this year’s remuneration report did not have the same level of support [as the other resolutions].

“In developing our remuneration policy, Burberry is guided by three principles: Delivering value to shareholders, ensuring business success and remaining competitive in the global talent market in the luxury industry.”

Peace said he would be getting shareholder feedback, and argued that had Burberry not created Bailey’s pay package last year, the result could have been damaging to the company in the long run.

On Friday, Burberry’s stock closed down 0.8 percent at 14.52 pounds, or $24.88.

On Thursday, Burberry lowered its full-year profit guidance, citing increasing headwinds from foreign exchange rates. The company also notched a 12 percent rise in same-store sales for the fiscal first quarter, and a 9 percent jump in revenue to 370 million pounds, or $622.5 million at average exchange, for the three months to June 30.

The British press played up the Bailey salary issue in the days leading to Friday’s AGM, with stories predicting a “widespread revolt” among shareholders and warning of a “looming clash” over Bailey’s pay.

Bailey certainly isn’t the first ceo to come under fire for the size of his salary, bonuses and shares.

Earlier this month, the board of the high-street retailer Sports Direct defied its shareholders by ramming through plans to award its controversial founder Mike Ashley shares worth up to 200 million pounds, or $343 million, despite concern over targets for the company’s incentive scheme.

Bailey’s maximum pay for the year is roughly in line with that of Deborah Lloyd, president and chief creative officer of Kate Spade, and slightly higher than that of Michael Kors, chairman and chief creative officer of the company that bears his name.

Luca Solca, managing director and sector head of global luxury goods at Exane BNP Paribas, said the non-binding vote regarding Bailey’s pay “shows investors are little by little becoming more sensitive to senior management pay issues — as they should. My sense, though, is that Burberry has always been on the high end of ceo pay — but also on the high end of ROIC [return on invested capital] and total shareholder returns. That’s good enough in my book.”

Now that he’s stepped off the shareholder microscope — for the moment, at least — Bailey is ready to get back to the design studio.

“I feel challenged, as I have felt challenged over the past 13 years,” he said following the AGM. Asked about juggling his new responsibilities, and the pressure to perform — especially with all of those shares at stake — he said: “The pressure needs to be there, and I enjoy leading a team of people to get the brand to where it needs to be.”

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