Shareholders vote against executives' bonuses at Bellway AGM

After the Satyam-Maytas fiasco, investor activism has again come to the fore with shareholders voting down a pay-and-bonus scheme for executives at Bellway, one of Britain's biggest builders. The unprecedented protest vote marked one of the few instances in which shareholders have defeated a remuneration plan for directors.

Almost 60 per cent of shareholders voting at Bellway's annual meeting in Newcastle yesterday vetoed the proposals which, if approved, would have given John Watson, the chief executive, a bonus worth 55 per cent of his salary.

Peter Stoker and Alistair Leitch, two other executives, would have qualified for the bonuses worth an estimated £630,000, after a sharp downturn in the company's fortunes and a 28-per cent fall in its share price. Watson was paid £825,000 for the financial year to 31 July 2008, while Stoker and Leitch received £544,000 each, according to the latest annual report. All this when shares in the company lost 28 per cent of their value, sales fell by 50 per cent and house prices collapsed.

"This is a very clear message that there must be a proper link between reward and performance, even in a sharp economic downturn," said Peter Montagnon, director of investment affairs at the Association of British Insurers. "It is right that Bellway should consult with shareholders on its policy review. More broadly, shareholders expect all companies to be sensitive to the need for bonuses to be paid only if stretching targets are met."

The ABI said this month that management had abandoned original bonus targets "when it became clear they were not going to meet them. They decided to pay bonuses anyway". The ABI then issued a rare "red-top" alert to Bellway's shareholders, warning that the company had breached best practice in awarding bonuses to the chief executive and two executives.

Bellway on Friday issued a statement immediately after its annual meeting saying that it will review directors' pay in consultation with shareholders in the coming months, without detailing that it had lost the vote.

"The board has noted shareholders' views on the Report of the Board on Directors' Remuneration and believes it was wrong in not consulting with major shareholders earlier," chairman Howard Dawe said in a statement.

Bellway shares fell 4p to 553p, not far short of half of their 12-month high of 920p. In April 2007, the shares were trading for £16.90.