Bellway directors to face shareholder wrath today

Bellway reaches high noon today and shareholders might already be preparing to arrive at the house builder’s annual meeting with custard pies at the ready.

What they should know, however, is that the top team are likely to emerge on stage wearing super-protective suits.

A breakfast-time call to Alistair Leitch, finance director, today (Friday) revealed the news that “we have our Kevlar suits here ready to put on”.

Radio Four has put Bellway’s controversial performance bonuses higher on the day’s news agenda with a lengthy coverage of the subject. Chief executive John Watson caught a few snatches as he “popped in and out of the shower”.

Bellway’s shareholder meetings are not normally a hot-bed of agitation as the top table typically find themselves facing no more than half-a-dozen shareholders, individuals who might be depicted as being the occupants of a “No 1 Acacia Avenue” type of property and who have presented themselves in order to raise a personal issue, perhaps relating to the state of their plumbing.

But such slumberland could be swept away at 12 noon, not lease by the anticipation of a swarm of story-hunting journalists from the daily papers.

“We’ve kept our dignity by not replying to what’s been said in the press,” said Leitch.

The issue is the fairness – or lack of fairness – over the performance bonuses of more than £600,000 in a year when the group’s share price fell by 25% and sales tumbled by 50%.

The move triggered a “red alert” from the Association of British Insurers which is less than happy with the situation.

The ABI represents major investors. Of about 700 companies which it monitors, the ABI says it only issues the warnings in about 2-3% of cases.

But the firm argued that it has done well compared with rivals such as Taylor Wimpey and Barratt Developments.

The ABI's head of investment affairs, Peter Montagnon, told the BBC: "One of the most important principles of directors' remuneration is that targets should be linked to performance. What they have done is torn up the targets and paid the bonuses anyway.

“It is important at the stage we have got to in the economic downturn that companies do not go on paying large salaries and bonuses regardless.

“Executive remuneration is becoming a hot political topic. They must be more sensitive to the situation because if they don't the whole system falls into disrepute.”

The Daily Telegraph reckons that the directors of Bellway face a shareholder revolt and public accusations of "fat-cattery".

Today’s Telegraph reports that some institutional investors say that they intended to vote against the award at the annual meeting with one telling the paper: “This is appalling. All house builders have been a disaster this year. Just because Bellway has been a little less disastrous does not make it a success."

The Telegraph also reveals that separate to the Bellway issue, institutional investors are examining a new report that will radically shake up boardroom pay with the aim of forcing directors to concentrate on the long-term impact of their decision, not just the company's immediate share price.

The report, written by Sir Andrew Likierman, who recently resigned as a director of the Bank of England and is now the new dean of London Business School, is currently being discussed by investors and the ABI.

In the report, Sir Andrew criticises the current pay deals as being too attached to narrow financial data.

The Telegraph’s summary of the report is that “it argues that concentrating on the share price can be "easily manipulated" by "encouraging additional risk-taking like acquisitions and leverage".

“Instead, pay should also be based on efforts that are made in the other, non-financial, areas, it says.

Many bosses having been highly incentivised to do deals which pushed up the share price in the short term.

The Telegraph states: "The banks are the obvious example – Sir Fred Goodwin [chief executive of Royal Bank of Scotland] was in effect incentivised to do a deal like ABN Amro rather than looking at the long-term sustainability of the company."