Interserve’s chief executive and chief financial officer both received maximum bonuses for four months work at the end of 2017, the contractor’s annual report has revealed.
Payouts recommended by Interserve’s remuneration committee were set out in its annual report for 2017, which was released today.
Chief executive Debbie White is lined up to receive £525,897 for her work from 1 September to 31 December last year.
This includes an annual variable pay (AVP) bonus of £270,089, which is 125 per cent of her pro-rata base salary of £216,667 since she joined in September 2017 – the maximum available under the AVP scheme.
The rest of her pay packet covers pension contributions and other benefits.
Interserve has also granted Ms White almost 1.9m shares to replace awards that she “forfeited” when she left Sodexo to join the company.
These will be given to her over 10 tranches between March this year and April 2020.
Almost 1.2m of these are not linked to any performance conditions, but Ms White must remain with the company to receive them.
Chief financial officer Mark Whiteling meanwhile has been awarded a bonus of £126,562 on top of his base salary of £101,250 for three months’ work between joining the company on 1 October and 31 December last year.
His total pay including pension contributions and other benefits was £246,433.
Shareholders will vote on the bonus recommendations at the company’s annual general meeting on 12 June.
The AVP bonus scheme is designed to reward “strong operational performance” which promotes the “long-term success of the company”, the annual report states.
Ms White’s targets were largely qualitative and include the strategic review of the business, “taking steps to deliver an effective restructuring of the group’s business”, and “building confidence among key stakeholders”.
Mr Whiteling’s main target was “delivering appropriate financial structures” for Interserve.
The company said both executives were also tasked with delivering “acceptable financial performance” in the last three months of 2017.
Ms White and Mr Whiteling were described as “exceptionally strong” by the remuneration committee in the firm’s annual report.
However, Applied Value director Stephen Rawlinson said the bonuses were “out of proportion against anything that can be assessed”.
“For the annual general meeting [the question is]: why did the remuneration committee decide these people should get basically more than double their base salary for three to four months’ work?” he said.
AJ Bell investment director Russ Mould said some shareholders might view the rewards as premature.
“I appreciate [Ms White] has taken on a very big and very complex job,” he said.
“It’s good that she’s got the refinancing sorted and the early steps are encouraging, but I think it is probably a little bit early to be pulling in substantial bonuses.”
In Ms White’s four months at the company she launched the Fit for Growth turnaround programme in October and secured £180m of short-term funding in December.
Mr Mould pointed out there was a growing trend of shareholders pushing back against executive bonuses, citing examples of recent revolts at Persimmon, Astra Zenica and Melrose.
“In the current environment, it is a bit of a red rag when somebody starts to claim quite big numbers on qualitative issues,” he said.
Mr Rawlinson said the decision of Interserve’s remuneration committee to recommend the bonuses was surprising, given recent criticisms of Carillion’s remuneration committee move to provide greater protection for executive payouts in 2016.
Interserve said new bonus targets for Ms White and Mr Whiteling were set when they joined the company, as targets set for the previous executives were “no longer relevant to the challenges faced” by the business.
The old targets included earnings per share and debt reduction, along with personal “strategic targets”.
Ms White’s total annual salary for 2018 is £767,000, including a pension contribution of 15 per cent.
If she hits performance targets in 2018 related to operating profit, operating cashflow and strategic targets, including progress on the remaining energy-from-waste projects, she will receive around £1.8m under the AVP and a long-term incentive plan.
The long-term incentive plan will measure Interserve’s performance compared to other listed companies, cumulative operating profit to the end of 2020, and the success of the company’s turnaround plan.
If Ms White’s performance exceeds the targets, then she could receive up to £2.6m.
Mr Whiteling’s annual salary is £479,000, including a pension contribution of 15 per cent, and his payout could hit almost £1.6m under similar measures to Ms White’s.
When Ms White took up her position on 1 September, Interserve shares were around £1.18. By 31 December they were trading at around 95p.
Interserve has been contacted for comment.