Galliford Try’s shareholders have been advised to vote against the contractor’s remuneration report after the firm relaxed rules around performance targets for directors.
In a letter to shareholders, Glass Lewis, which advises major institutional investors in Galliford Try, accused the contractor of failing to adequately explain why it was reducing the threshold at which top executives qualified for bonuses.
In its summary analysis sent to investors, Glass Lewis said: “Given our concerns regarding the adjustment to performance criteria, we cannot recommend that shareholders support this [remuneration] proposal at this time.”
Glass Lewis noted that Galliford Try had lowered the threshold at which targets – known as return on net assets (RoNA) targets – for bonuses in 2018/19 would be met from 31-34 per cent down to 24.5-27 per cent, which it said would make it easier for the top directors to achieve their targets.
RoNA is used as a key performance target by Galliford Try’s remuneration committee to calculate bonus awards.
The Glass Lewis report accused the firm of failing to explain the changes: “While cognisant of the need for occasional target adjustments, to our knowledge, the committee has failed to explicitly address the lowering of FY2018/19 LTI performance criteria.
“The committee has lowered the LTI performance targets for awards to be granted in the coming fiscal year without providing any rationale.
“Further, while acknowledging the company’s rationale, we remain concerned with the extent of the discretion utilised by the committee in adjusting targets for awards granted in previous years. As such, we cannot recommend that shareholders support this proposal at this time.”
Major shareholders in Galliford Try include Black Rock, which owns 12.6 per cent of the company, Standard Life (6.2 per cent), Brewin Dolphin (5.5 per cent) and Dimensional Fund Advisors (4.5 per cent).
Galliford Try’s remuneration report puts chief executive Peter Truscott (pictured) in line for a £689,000 bonus on top of his £530,000 salary, with total pay including bonuses standing at £1.48m.
The firm’s chief financial officer Graham Perthero would receive a bonus of £344,000, sending total remuneration to £921,000.
Glass Lewis said Galliford Try’s remuneration committee should be “mindful” of shareholder experience when considering adjusting performance metrics used to calculate senior bonuses.
It also noted that Galliford Try experienced a 10 per cent fall in its share price following the £98.3m charge relating to problems with the Aberdeen Western Perhipery Route (AWPR), and a further 20 per cent drop after it announced a £150m capital raising programme following Carillion’s collapse.
Last week Scotland’s transport minister criticised the joint venture between Galliford Try and Balfour Beatty delivering the AWPR after yet another delay was announced to the £745m scheme.
Galliford’s annual general meeting will take place this Friday 9 November.
A spokesperson for the contractor said: “Galliford Try receives advice to ensure that the remuneration policies balance the interests of the shareholders with its ability to incentivise and retain its senior management.
“The targets are based on the original three-year plan supported by shareholders.
“They are no less challenging than those originally set but reflect the change in the shape of the group post its rights issue.
“Notwithstanding the exceptional charge or costs, the company delivered a record profit this year.”