Faroe Petroleum avoided a potential shareholder revolt over a scheme to reward senior bosses with free shares by withdrawing the controversial proposal before its AGM yesterday.
The Aberdeen-based oil and gas firm said it intended to make “a number of changes” to the proposed exceptional performance incentive plan (EPIP) and, consequently, resolution seven at the annual meeting in London had been purged.
Faroe also said the decision was made in response to “further dialogue” with its larger shareholders after notice of the AGM was published in April.
Remuneration committee chairman Tim Read added: “The context of management incentivisation has clearly changed over the last few weeks and the board felt it appropriate to re-visit the issue . . . to re-align it with current shareholder sentiment.”
Investor group Sharesoc had urged shareholders to vote against the Epip, which could have seen three of Faroe’s senior management, including chief executive Graham Stewart, granted free options on more than one million shares.
The details of the performance conditions were complex but the prime requirement for full vesting was a total shareholder return (TSR) of 25% per annum over three years.
Mr Stewart could have picked up 707,951 shares, while fellow executive directors Iain Lanaghan and Helge Hammer were in line for as many as 424,771 and 283,180 respectively.
Faroe’s shares were worth 157.4p last night, meaning the three directors were in line for substantial windfalls under the EPIP.
Sharesoc said a performance incentive scheme focused primarily on TSR was “not a prudent arrangement”, adding: “It encourages a focus on the short-term share price instead of the fundamental strength of the business.”
Such share options were also contrary to guidelines on remuneration laid down by the Association of British Insurers and National Association of Pension Funds, it said.
ShareSoc chairman Roger Lawson said the complex and extremely generous scheme proposed by Faroe was a “good example of what is wrong with executive remuneration in public companies”.
Yesterday’s AGM came amid growing unrest over pay and bonuses among investors in UK-listed companies. Barclays, Premier Foods, William Hill, Aviva, Cairn Energy and Shell are among firms suffering a backlash from shareholders in recent weeks.
Faroe did not give a voting breakdown at its meeting, but a spokesman said all but one of the resolutions put to shareholders was passed.
The exception involved share placements.