Hermes opposes the appointment of Michael Dobson as Chair of Schroders

Also recommends voting against a number of remuneration-related proposals at Shire, Weir Group and Tullow Oil AGMs

Ahead of four high-profile AGMs taking place today, Dr Hans-Christoph Hirt, Co-Head of Hermes EOS, outlines our opposition to Michael Dobson’s appointment as Chair of Schroders, and why we recommend voting against three remuneration proposals at AGMs today.

Schroders
Following the appointment of Michael Dobson, the company’s former CEO, as Chair and the Board’s proposal to shareholders to re-elect him to the Board, we intensified our engagement with the company on Board composition. Key points our engagement team have raised include:

• We are supportive of the appointment of Peter Harrison to CEO and the timing of the CEO succession process.

• We also support the board’s intentions to recruit further Non-Executives, particularly seeking technology, international and plc experience. This commitment will lead to a majority independent board.

• While we recognise the significant contribution that Michael Dobson has made in his tenure as CEO, we are not able to support the decision to appoint him as Chair. Although we recognise some of the key client, regulator and strategic partner relationships he holds, we do not believe that these justify a breach of a fundamental principle of UK corporate governance and best practice that a CEO should not become Chair of the company.

As such, at the Annual General Meeting of Schroders today, we have recommended that our clients vote against the re-election of both the Senior Independent Director, who led the Chair succession process, and of Michael Dobson.

Shire
We do not support the increase in salary of 25% for the CEO, Dr Flemming Ornskov, particularly given that his overall bonus potential is more than 10 times his basic salary and his total remuneration was over $21m last year. We believe that an incremental approach to salary rises is more appropriate and should reflect shareholder value creation over the longer term.

Weir Group
In the binding vote on the proposal to approve the remuneration policy, we are recommending to clients that they vote against, due to the proposed award of restricted shares which are not tied to performance targets. To focus on creating value over the long term, we believe that the company should have performance targets and apply the test of common sense if these prove to be unrealistic due to unanticipated market conditions.

Tullow Oil
We are recommending that clients vote against this year’s pay awards at Tullow Oil as we believe that the bonus award to executives (at 38% of the potential maximum), which equates to almost two times basic salary, is out of step with the decline in Tullow’s share price of approximately 80% over the last three years.  We feel that there is a good case here for downward discretion to have been applied by the remuneration committee to the mechanistic outcome of the remuneration policy.

For more information on our position regarding executive remuneration, please refer to our policy document:
Remuneration principles for building and reinforcing long-term business success (September 2015)