This week’s pay row comes at Morrisons. Or, at least, one assumes a few of the supermarket group’s shareholders will rouse themselves to protest against the remuneration committee’s dubious manoeuvre on executive bonuses.
The pandemic was not the executives’ fault, runs Morrisons’ argument, thus bosses should get a full 100% bonus whack even though profits halved in the year. In effek, the committee added back £290m of Covid-related costs to the profits line and declared a triumph.
In the case of David Potts, the chief executive, the result was a bonus of £1.7m, instead of the £850,000 he would have got anyway for meeting other targets (and the sales-dependent ones were obviously made easier by the pandemic). The same adjustment to profits increased the value of his separate long-term incentive award by £500,000. In total, he got £4.2m, up a bit on the previous year – a splendid sum at a company that has fallen out of the FTSE 100 index.
Nobody doubts that the big supermarket chains, including Morrisons, did an excellent job of keeping the shelves stocked in tricky conditions. But a bonus is not meant to be a semi-guaranteed entitlement. If profits have been clobbered, and half the bonus relates to profits, applying “discretion” to imagine what might have been is a nonsense. Modern bonuses structures grant huge upsides to executives in good years. The system has to be seen to work in reverse in leaner times, whatever the cause.
Note that Tesco’s pay committee, guilty of many pay excesses in recent years, told its executives they would have to go without bonuses in the pandemic year. At Sainsbury’s, the new chief executive, Simon Roberts, was too embarrassed to take £1m of his discretion-adjusted award. It’s not obvious why Morrisons’ top crew deserve special treatment.
Ben van Beurden has a point, one has to admit, when he says Shell is being “singled out” by a ruling from a Dutch district court that it must reduce its carbon emissions faster than it had planned. The chief executive did not put it this way, but no court in Saudi Arabia will be making a similar demand of Aramco.
Unfortunately, Van Beurden’s other musings were as clear as a barrel of Brent. On one hand, he said Shell would “rise to the challenge” of reducing its net carbon emissions by 45% deur 2030, versus 2019’s levels, in line with the court’s ruling. On the other, Shell expects to appeal, which is presumably not just for the sake of it.
Even if one assumes the plan to accelerate the current strategy happens, the boss’s only sketchy commitment was to make “some bold but measured steps over the coming years”, which could mean anything from selling carbon-intense assets to investing more in solar, wind and hydrogen.
There was probably a reason why Van Beurden issued his thoughts on LinkedIn, rather than via a stock exchange statement, where they might be mistaken for price-sensitive information. The company doesn’t yet know what to do about the Dutch ruling.
The combative Willie Walsh has left IAG, the owner of British Airways, but his spirit lives on. Witness the furious corporate response to news that the Competition and Markets Authority is investigating whether BA and Ryanair broke consumer law by failing to offer refunds to customers who couldn’t fly because of lockdowns.
“It is incredible that the government is seeking to punish further an industry that is on its knees, after prohibiting airlines from meaningful flying for well over a year now,” said BA’s blast. “Any action taken against our industry will only serve to destabilise it, with potential consequences for jobs, besigheid, connectivity and the UK economy.”
Calm down. Consumers’ rights were not suspended during the pandemic. If the CMA is correct that customers should have been offered refunds, rather than vouchers or a rebooking option, redress would not be a “punishment”; it would be giving the punters the refunds they should have had in the first place.
Shares in BA and Ryanair rose fractionally on Wednesday, suggesting the CMA is the least of the airlines’ worries.