Compass shareholders urged to reject pay plan

Troubled UK catering giant Compass today faced opposition to a pay overhaul due to come into force ahead of the appointment of a new chief executive.

At an AGM next Friday, Compass will ask shareholders to approve the doubling of the chief executive’s bonus under its long-term incentive plan – from up to 100% of basic salary to up to 200%.

Compass pointed out it cut back other parts of its bonus scheme last year, such as the annual cash bonus and share options.

But Pensions Investment Research Consultants (Pirc), the corporate governance group, urged shareholders to reject the proposal because performance targets will not have been raised as well.

Pirc spokesman David Somerlinck said: “We feel that the changes Compass is proposing are not appropriate. They are increasing the reward without increasing the performance targets.”

When combined with other bonuses, the proposed change could see the new chief executive earn around £5 (€7.4m) a year if the basic salary matches the £1m (€1.5m) wage paid to outgoing boss Mike Bailey.

The payments depend on performance, including pre-tax profits growth, turnover growth and cash flow growth, with the target set for free cash flow of £800m (€1.2bn) to £850 (€1.25bn) over three years.

Compass said that without the earlier changes to the annual bonus the chief executive could have earned up to £7m (€10.3m) compared with the maximum £5m (€7.4m) now on offer.

Among the names touted as a possible successor to Mr Bailey is former chief executive of plasterboard maker BPB Richard Cousins.

The search for a new boss comes after a difficult year for Compass, in which its pensions deficit reached £532m (€782.7m).

Compass, which is based in Chertsey in Surrey, has seen its share price hit by a series of profits warnings, and it has also sacked three senior executives after an investigation into how UN contracts were awarded raised “serious concerns”.

Shares have plummeted in recent years from 570p in 2001 and 380p in 2004 to a low of 175p last year. Last night shares closed at 221.5p.

Compass supplies meals to school children in the UK and other contract catering, as well as support services. It is currently auctioning off its Select Services Partners division, which includes the Moto motorway service stations, Harry Ramsden’s and the Upper Crust sandwich chain, and is estimated to be worth more than £1bn (€1.5bn).