by Erica Billingham
Hemingway Properties is under pressure to toughen up its directors’ bonus scheme after chief executive Michael Goldhill and finance director Andrew Browne each received £1.4m.
Major shareholders are scrutinising Hemingway’s proposals for a long-term incentive package to replace the scheme which has just expired.
Some institutional investors believe that the old scheme – which has paid out a total £3.1m in bonuses since 1993 – was too generous. They want to ensure that Hemingway’s directors work harder for their rewards.
Standard Life, which owns 7% of Hemingway, voted against the original scheme in 1993 and is keen to see an improved replacement.
Guy Jubb, head of corporate governance, said: “We will be looking for any scheme going forward to incorporate performance targets that are not only relevant but also stretching.”
The size of Goldhill and Browne’s final award under the old scheme is revealed in Hemingway’s 1997 accounts, published last week. The £1.4m payments to both men reflected the company’s performance over the past five years.
Added to a £208,000 basic salary and £147,748 from cashing in share options, the long-term incentive payments inflated Goldhill and Browne’s total pay to £1.8m, from £300,000 in 1996.
This sixfold increase in total remuneration puts the pair ahead of last year’s top earners, Helical Bar chief executive Mike Slade, who took home £1m, and British Land chairman John Ritblat, who earned £768,000.
Hemingway, which is one of the sector’s smaller companies with a £76m market value, lifted pretax profit 20% to £7.8m in 1997. The net asset value jumped 30% to 57p per share in the year to December.
Hemingway’s old long-term incentive plan was approved by shareholders in 1993 – before the Greenbury report put executive pay under the spotlight.
The payments were triggered when Hemingway’s NAV per share increased by 3% more than the IPD total return index in each of the five years to December 1997.
But institutional investors now believe that this target was set too low and are pressing Hemingway to include tougher performance measures in the new scheme.
A second shareholder said: “Things have moved on since 1993. Targets being set now are much more demanding than they were. We would not feel that 3% pa is a particularly tough target.”
Hemingway has sent a draft of the revised scheme to shareholders, who are scrutinising the plan. They are co-ordinating their responses through the Association of British Insurers, which has discussed the issue with Hemingway’s remuneration committee, chaired by John Emly.
Goldhill and Browne were unavailable for comment.
