A large proportion of SIG investors will oppose a £350,000 payment to its boss next week, Sky News learns.
One of the UK’s biggest building materials groups is braced for an ugly shareholder revolt next week over a £350,000 one-off payment to its new chief executive.
Sky News has learnt that SIG, which is in the process of raising £165m to strengthen its balance sheet because of the COVID-19 pandemic, is preparing to see a large proportion of its investor base oppose the payment to Steve Francis.
The prospect of a revolt has been fuelled by opposition to the payment from Institutional Shareholder Services, the proxy voting agency, which has described it as “poor practice” and not aligned with investors’ interests because the bulk of it will be made in cash.
SIG says that the £350,000 award, which equates to almost two-thirds of Mr Francis’s base salary, was made because of his performance as its interim chief executive between late February and April, and then subsequently as its permanent chief.
Mr Francis is a former boss of Patisserie Holdings, the owner of Patisserie Valerie, which became embroiled in a major fraud scandal just over 18 months ago.
Because the payment falls outside SIG’s approved remuneration policy, it requires separate endorsement from shareholders.
The EGM, which takes place next Thursday, has been convened to vote on a recapitalisation of SIG’s balance sheet that will see the buyout firm Clayton Dubilier & Rice become its largest shareholder.
The deal will raise £165m in new equity, averting the immediate risk of SIG breaching its banking covenants.
It will be the first such capital-raising in the London market for more than a decade that will see a so-called Private Investment in Public Equity (PIPE) of this nature.
City insiders believe it could provide a valuable template for private equity firms to help re-equitise companies which have been forced to borrow money to survive the pandemic.
An SIG spokesman said: “We are disappointed with the recommendation to vote against this [pay] resolution, as we are firmly of the view that this payment is fully justified, as recognised by a number of our large shareholders who know us well and are supportive.
“Steve joined a company which was already struggling, pre COVID-19, on a lower salary than his predecessor and almost immediately accepted a reduction of 20% in salary for the last three months.
“Since then he has managed through the crisis, developed a new strategy, strengthened the senior management team, renegotiated the company’s debt facilities, introduced CD&R as a cornerstone investor and led a £165m capital raise – therefore putting the company on a sound financial footing, and well-positioned to realise considerable shareholder value.
It added that Mr Francis would be investing “a very meaningful proportion of the net payment into SIG shares, thus aligning himself with shareholders’ interests”.