London Stock Exchange owner plots multimillion pound pay rise for CEO

Published

3 months ago

February 19, 2024

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The owner of the London Stock Exchange is plotting a multimillion pound pay rise for its chief executive amid a debate about whether FTSE 100 bosses’ incentive packages are damaging the competitiveness of Britain’s economy.

Sky News has learnt that London Stock Exchange Group (LSEG) is consulting with its major shareholders about a revised pay policy that would give boss David Schwimmer the opportunity to earn almost double his current maximum package of £6.25m.

Last year, Mr Schwimmer was paid just over £4.7m, of which £1m was his base salary, £1.4m his annual bonus and nearly £2m in the form of a long-term incentive award.

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Sources said that LSEG was now proposing to increase Mr Schwimmer’s base pay to around £1.25m, while his annual bonus opportunity would increase from 225% of salary to 300%.

In addition, his maximum annual LTIP award would increase from 300% of salary to 550%.

That would mean Mr Schwimmer, who has transformed the company since he took over in 2018, was eligible for a total package of around £11m.

One shareholder said they were backing the proposals ahead of LSEG’s annual general meeting in the spring because of concerns about the flow of UK-listed companies heading across the Atlantic to list on US stock markets.

The peer group of companies with which LSEG was competing was not other large FTSE-100 companies, they added, but American technology companies which were able to pay vastly higher remuneration packages.

Julia Hoggett, the LSEG chief executive who runs the London Stock Exchange subsidiary, sparked a debate last year when she warned that lower executive pay was hampering the ability of British companies to draw ‘global talent’ to their ranks.

Mr Schwimmer’s revised pay package has been communicated to nearly 100 investors during private discussions, with the response overwhelmingly positive, according to several sources.

In addition to his bigger pay deal, his minimum shareholding requirement will be increased from four times his salary to six times, according to one shareholder consulted on the plans.

The proposals are significant, partly because LSEG owns the London exchange and Ms Hoggett’s recent comments, but also because the body which represents institutional investors has also signalled a softening approach to large boardroom pay deals.

An LSEG spokeswoman said: “As stated in LSEG’s 2022 annual report, the remuneration committee will present a new policy to shareholders in 2024.

“The committee periodically reviews executive remuneration arrangements, in line with usual corporate governance practices, to ensure they remain fit for purpose and aligned to our ambitious growth strategy.

“The policy will focus on attracting, securing, retaining and rewarding the best talent in a competitive global market.”

Sky News revealed last month that the Investment Association, whose members collectively manage £8.8trn in assets, had drafted a letter to the chairs of FTSE-350 remuneration committees in which it highlighted a significant change in its stance towards bosses’ pay.

The IA said it acknowledged feedback from companies – particularly the largest in the FTSE-100 – that they were finding it increasingly challenging to “attract US executives and compete in the US market” because of the gulf between pay deals for bosses working for London and New York-listed businesses.

The draft also highlighted a growing desire from British companies to introduce so-called hybrid incentive schemes comprising both restricted stock and long-term share awards.

“These global companies are able to use such schemes in the US and other jurisdictions and feel such structures should be used for their executives,” the draft letter says.

The investor body flagged concerns raised by companies that the range of measures – such as malus, clawback and post-employment shareholding requirements – designed to prevent high pay packages being awarded without appropriate long-term evidence of strong financial performance may have gone too far.

“Individually, they are accepted as a means to increase the long-term alignment of executives and shareholders but in aggregate there may be a view that the perceived impact on the value of remuneration received is disproportionate,” it said.

The letter comes amid growing fears for the future of the London stock market following the release of data showing that the declining number of companies listed in the UK has accelerated in recent years, and amid visible signs that the City is losing ground to its biggest global rival.

Last month, Flutter Entertainment, the owner of Paddy Power and Betfair, confirmed that it intended to shift its primary listing to the US, while a growing number of companies have said they plan to float in New York rather than London.

In recent months, a number of prominent public company bosses, including the former chief executives of Barclays, BP and NatWest, have seen tens of millions of pounds of pay awards cancelled and clawed back owing to revelations of misconduct.

The latest intervention from the IA therefore marks a decisive shift from its stance in recent years, which has sought to hold boardroom pay chiefs to account over perceptions of excess in boardroom pay practices.

In 2017, the trade body introduced a public register to draw attention to any public company receiving significant opposition to boardroom pay packages in an attempt to put the brakes on inflated awards.

It also fought to curb windfall gains for executives after the Covid-19 pandemic triggered a plunge in many companies’ share prices, handing them bumper stock awards several years later.

Its revamped approach to executive pay nevertheless has the potential to prove controversial given ongoing concerns about the cost of living and the perspective of campaigners against multimillion pound corporate pay packages.

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£4.7bn spent on EU border checks but some costs ‘unnecessary’ and timetable unclear, says new National Audit Office report

Published

9 hours ago

May 20, 2024

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£4.7bn spent on EU border checks but some costs 'unnecessary' and timetable unclear, says new National Audit Office report

Traders are facing increased costs and more paperwork due to Brexit border controls, according to a new report from the independent public spending watchdog.

The government is estimated to have spent £4.7bn so far but some of that spending was not necessary, the National Audit Office (NAO) has said.

Despite the UK voting to leave the European Union in 2016 – and officially exiting in 2020 – many border control checks are yet to be implemented.

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It is “not clear” when the checks will be fully in place, said Parliament’s spending authority in its trade border report, and there is no timetable for government to achieve its “world’s most effective border” target.

This lack of certainty, as well as “repeated delays” in bringing in import controls, resulted in spending on infrastructure and staff that was “ultimately not needed”, according to the NAO.

Those delays and the associated uncertainty have also impacted businesses by adding extra cost and admin burdens, the watchdog added.

Late policy announcements have reduced the ability of businesses and ports to prepare for changes, the report said.

After five delays, the first phase of border barriers – requiring additional certification – came into force on 31 January this year, with a second phase having started on 30 April when physical checks were introduced at ports.

A third phase, requiring safety and security declarations, is scheduled for 31 October. These phases are partial import controls.

‘Increased biosecurity risk’

The UK is at “increased biosecurity risk” due to the phased implementation approach and having lost access to EU surveillance and alert systems after Brexit, the NAO said.

There is reduced awareness of “impending dangers”, such as African Swine Fever, it added.

Customs declaration work borne by businesses had been estimated to cost organisations a collective £7.5bn, according to HM Revenue and Customs (HMRC) figures in 2019, which the NAO notes has not been updated despite 39m customs declarations being made on goods moving between Britain and the EU in 2022.

The government’s £4.7bn figure is an estimate of post-Brexit border management and does not factor in the full, eventual cost.

Strategy ‘lacks clear timetable’

It has not specified when a full regime will be in place but said it intends to introduce most of the remaining import controls during 2024.

The NAO said the 2025 UK border strategy “lacks a clear timetable” and cross-government delivery plan, with individual departments leading and implementing different parts.

It added that annual reports on progress will not be published until 2025 “at the earliest”, despite the government saying in its border strategy in 2020 that it would publish yearly progress reports.

The NAO recommended full border controls operate at all ports “as soon as possible”.

Business

Online fashion giant Shein approaches Sajid Javid ahead of blockbuster IPO

Published

11 hours ago

May 20, 2024

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Online fashion giant Shein approaches Sajid Javid ahead of blockbuster IPO

Sajid Javid, the former chancellor of the exchequer, has been approached about taking a role at Shein, the online fashion giant which is progressing plans for London’s biggest stock market float for years.

Sky News has learnt that Mr Javid is among a number of senior City figures who have held talks with Donald Tang, Shein’s executive chairman, in recent weeks.

City sources said that if the appointment of Mr Javid proceeded, it could see him either join Shein’s board or become an adviser to the Chinese-founded company.

They added that Baroness Fairhead, the former BBC Trust chair, was also on a list of candidates drawn up by headhunters advising Shein.

One person close to the company said the identities of those being approached reflected both the seriousness with which Shein was taking the issue of corporate governance and the extent of its focus on a London listing.

Since leaving the government, Mr Javid has taken a role with Centricus, an investment firm which tried unsuccessfully to structure an offer for Chelsea Football Club in 2022.

A spokesman for him, who had insisted that Mr Javid would stand for re-election in his Bromsgrove seat a week before publicly announcing the opposite, did not respond to a request for comment from Sky News.

In recent weeks, several reports have repeated Sky News’ revelation that Shein has turned its attention to a London flotation amid difficulties in securing approval from US regulators.

An initial public offering would be likely to value Shein at around £50bn or more.

Paris is also understood to have been considered by the company as a possible listing venue.

Earlier this year, Jeremy Hunt, the chancellor, held talks with Donald Tang, Shein’s executive chairman, to persuade the company to commit to what would be one of London’s biggest-ever corporate flotations.

The meeting between Mr Hunt and Mr Tang underlined the importance that British officials are attaching to the idea of trumping the US in an effort to land the Shein IPO.

If it proceeded, Shein could become the London Stock Exchange’s second-largest IPO in history, behind the 2011 stock market debut of Glencore International, the commodities trading and mining group.

Mr Tang has also met executives from the LSE as well as more junior ministers as part of its IPO preparations.

Shein filed documents for a New York listing last year, but has grown concerned that its application may be rejected by the US Securities and Exchange Commission.

Goldman Sachs, JP Morgan and Morgan Stanley are advising on the deal.

Based in Singapore, Shein has become one of the world’s largest online fashion retailers, although its growth has not been untroubled amid mounting concerns about labour standards.

Last year, Sky News revealed that Shein was in talks to buy the British fashion brand Missguided from Mike Ashley’s Frasers Group.

While the transaction itself was worth only a modest sum, retail analysts said that it could pave the way for Shein to build a more meaningful profile in the UK, potentially through a broader collaboration with Frasers.

Founded in China in 2012, Shein was valued at over $100bn last year, at which point it was worth more than H&M and Zara’s parent company, Inditex, combined.

The company’s valuation was slashed to $66bn as part of a share sale last year.

Shein operates in more than 150 countries.

It has also struck an agreement with SPARC Group, a joint venture between the Ted Baker-owner ABG and Simon Property Group, a US shopping mall operator.

Under that deal, SPARC’s Forever 21 fashion brand gained distribution on the Shein platform, which boasts 150m users globally.

Shein acquired a one-third stake in SPARC Group, while SPARC Group also took an undisclosed minority interest in Shein.

The LSE’s efforts to court Shein come during a challenging period for the City as a listing venue for large multinationals, with ARM Holdings, the UK-based chip designer, opting to float in New York rather than London.

Other companies, such as the gambling operator Flutter Entertainment and drug company Indivior, are planning to shift their primary listings to the US, citing higher valuations and more liquid markets.

In recent weeks, however, London has landed the prospective IPOs of Raspberry Pi, the personal computer maker, and AOTI, a medical technology provider.

Mr Hunt last week hosted a summit at Dorneywood attended by technology companies looking at listing in the UK.

Shein declined to comment.

Business

Record profits at Ryanair after costs rise – but ticket price cuts could be on the way

Published

11 hours ago

May 20, 2024

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Record profits at Ryanair after costs rise - but ticket price cuts could be on the way

Ryanair has reported another year of record profits and passenger numbers.

The average fare at the airline, which is Europe’s largest by passenger numbers, was 21% more expensive than 12 months earlier, its annual results showed.

But the company suggested a cut in ticket prices could be on the way after this summer when prices will either be the same or more expensive than last year.

Annual profits reached €1.92bn (£1.64bn), surpassing the previous record of €1.45bn (£1.26bn) made in the year ending March 2018.

Passenger numbers also outpaced previous all-time highs and are now well above pre-pandemic numbers at 184 million – a rise of 23% on the pre-COVID year of 2019.

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Ticket prices

Those passengers paid fares costing an average of 21% more than the year up to March 2023 but Ryanair’s chief executive Michael O’Leary said if the company has to cut fares to have planes 94% full next April, May and June “then so be it”.

While demand is “strong” for summer flights and its summer schedule will operate over 200 new routes, the low-cost carrier said it remained “cautiously optimistic that peak summer 2024 fares will be flat to modestly ahead of last summer”.

Boeing headwinds

The passenger increase has come despite Boeing‘s delays in delivering new planes to the airline.

Ryanair had staked a large part of its financial success on expansion through 300 new 737 MAX 10 aircraft.

But the plane manufacturer has been beset by delays amid regulatory and media scrutiny of safety at its manufacturing sites after a door blew off an Alaska Airlines Boeing 737 MAX 9 jet.

There’s a risk those delays “could slip further”, Mr O’Leary said.

But Ryanair said it would receive “modest compensation” from Boeing for the delays.

The no-frills carrier also said its fuel bill rose 32% to €5.14bn (£4.4bn).