Pay rise sparks investor fury
GVC’s embattled CEO, Kenneth Alexander, has given into pressure to forgo 75% of a proposed pay rise, after shareholders reacted with fury.
Investors have been displeased with GVC’s governance for months, and news that Alexander’s annual salary was to increase to £950,000 ($1.2m) from £750,000 ($944,370) may be the last straw. GVC is desperate to prevent a shareholder rebellion at its AGM in Gibraltar on June 5.
Following discussions with GVC’s board of governors, Alexander has now agreed to accept a salary of £800,000 ($1m) from June 1.
GVC issued a statement that said: “After consulting with GVC’s chairman and remuneration committee chair, GVC’s chief executive officer has volunteered to reduce his annual salary from £950,000 to £800,000. This offer was made in light of recent shareholder and proxy adviser feedback on GVC’s 2018 remuneration report and on our remuneration committee chair. This change will take effect from 1 June 2019.
“The remuneration committee recognizes that the ‘single figures’ of total remuneration shown for the chairman and CEO are substantial. These primarily relate to legacy awards made under the 2015 LTIP [long-term incentive plan] at the time of the acquisition of bwin.party, coupled with our strong share price performance over the vesting period. Our new policy framework will result in significantly lower levels of total remuneration from 2019 onwards.”
Approval looks unlikely
However, the change to Alexander’s proposed pay rise may not be enough to stop shareholders rebelling. They have already been recommended by voter advisory organizations to reject Alexander’s remuneration package. Last year, the CEO was paid more than £19m ($24m) in base pay plus shares. Some of this was the legacy award dating from when GVC took over the mobile gambling platform bwin.party.
Shareholders are growing increasingly fed up with the way the company is run, and the gambling giant would be unwise to ignore its investors.
This year’s pay package incentive is based on an assumption of achieving a particular profit level by 2022. Sky News reported, however, that Merian Global Investors and other UK financial institutions believe the potential profit should be higher, based on current forecasts by investment analysts.
Merian’s head of UK equities, Richard Buxton, said: “We have discussed this extensively with the remuneration committee chair and there seems to be a complete disconnect between the ‘considerable uncertainties’ cited by management when in discussions with the remuneration committee and the overwhelming confidence management expresses when in conversation with us as shareholders.”
He added that the stock markets would be “significantly disappointed” if the company delivered only the remuneration committee’s target, and that Merian would not vote in support of Alexander’s pay rise.
Merian is unlikely to be alone in its decision at next week’s AGM. Last year, 44% of shareholders voted against Alexander’s pay package and this year that percentage is expected to rise dramatically. If GVC chooses to ignore its shareholders, it will face demands for a widespread change of governance at both board and executive levels.
Beleaguered times for GVC
Alexander has a knack of infuriating GVC’s investors. In March, he and former chair Lee Feldman together dumped £20m ($25.2m) worth of GVC shares on the stock market. Their fire sale triggered an 18% slump in the share price from £6.84 ($8.98) to £5.60 ($7.35).
Shareholders reacted with anger to the share dump. It wiped hundreds of millions of pounds off the company’s value and led to the lowest price for GVC shares since 2016. This was despite the company having just announced excellent financial results for 2018.
Alexander’s divestment amounted to 76% of his holding in GVC. He currently holds nearly 1.7m shares, after being given more than 450,000 extra shares on March 27.
Feldman was already due to depart GVC next year but it is thought GVC is aiming to replace him sooner if the board can find the right candidate.
Director Peter Isola was forced to resign last summer, after a shareholder rebellion. They demanded his sacking after it was revealed that two company executives between them earned salaries totaling £67m ($87.8m).
GVC, the UK’s biggest bookmaker and owner of Ladbrokes, expects profits to dive £130m next year. The estimated drop is due to new regulations that saw the maximum stake on fixed ods betting terminals slashed from £100 to £2.
The company share price has fallen by more than 40% in the last 12 months, despite a brief rally after Alexander’s share dump. No wonder investors are restless…