Frasers Group PLC (LSE:FRAS) will be holding its annual general meeting tomorrow (Wednesday) and Resolution 19 is one of the hot topics.
Resolution 19 could see Michael Murray, chief executive and son-in-law to founder Mike Ashley, walk away with £100mln in the form of 6mln shares in the next four years.
The award would be part of a plan first introduced as a way of implementing a bonus system to “promote long-term shareholdings by executive directors that support alignment with long-term shareholder interests,"
Not all are convinced, though, and shareholder advisers Glass Lewis and Institutional Shareholder Services are again advising clients to reject the scheme.
So, how does the scheme work, and how could Michael Murray potentially bank up to £100mln?
How does it work?
The scheme is subject to a vesting period of four years, ending in October 2025 and is only granted if two things happen during that time.
Firstly, the share price reaches £15 for a period of at least 30 days continuously.
Secondly, the retailer which has recently been on a heavy buying spree, building stakes and hoovering up the likes of I Saw It First, must report a profit before tax of £500mln in any of those financial years.
Shareholders will be voting on Wednesday to approve both the increase in target price as well as the requirement to hit the £500mln profits target.
Last year, Frasers reported a profit before tax of £344mln, though its share price hasn’t been above £10 since it was listed over 15 years ago.
Where does Murray’s figure come from?
As part of Frasers' remuneration policy, Murray is entitled to 6,711,409 shares for achieving the aforementioned criteria.
So, if Frasers reach those targets in the next four years, Murray will receive those shares and at the share price target of £15 they would be worth £100,671,135.
Too much. Maybe, but in achieving the goal of a £15 target price Murray would have more than doubled the group’s market cap, currently, just over £3bn and some investors might consider that a small price to have paid.
Even so, Glass Lewis and ISS have serious reservations.
They note the erratic and unpredictable state of the market, which has seen Frasers’ own share price start the year at 787p, before climbing to 947p in July and tumbling back to 647p as one reason to vote against the deal.
Essentially, they are worried Murray would receive a huge payout not through any of his own hard work, but through the erratic market.
Last year their objections fell on deaf ears.
Wednesday's AGM will tell us if the mood has changed but with Murray's father-in-law still Frasers' majority shareholder don't expect too much boat-rocking.