Foxtons is facing a backlash among its shareholders over a decision to award a near-£1m bonus to its chief executive while refusing to pay back millions of pounds in taxpayer-funded government support to weather the Covid-19 pandemic.
The London estate agent, which has received almost £7m in government furlough money for staff and business rates relief, has also continued to spend freely to build its business.
On Wednesday the company revealed that it had made a £3m investment in Boomin, the property site set up by the co-founder of Purplebricks Michael Bruce, just weeks after spending £14m to buy the rival London agency Douglas & Gordon. In November, Foxtons paid £2.2m for Aston Rowe.
Foxtons has now revealed that Nicholas Budden, the chief executive, is to receive an annual bonus payment of £389,300 in 2020 to “reward hard work” in a year in which the business had done “well in very tough circumstances”. In addition, Budden has also been handed shares worth £569,000 under a long-term incentive scheme, which will be released in five years’ time.
Foxtons took about £4.4m in furlough money and £2.5m in business rates relief.
“Like many businesses, Foxtons was forced to close for months over the past year,” said a spokeswoman for the company. “We were very grateful for government support, which we used for as short a period as possible but entirely as it was intended – to keep people in jobs during a lengthy closure.”
However, two of the world’s largest and most influential investor advisory services, Glass Lewis and ISS, criticised Budden’s remuneration in a year which also saw Foxtons’ share price fall by about a third.
“Some investors may question the appropriateness of awarding bonus payments to the executive directors before paying back the government support received,” ISS said in a note to investors. “There is a material disconnect between bonus outcomes and company performance.”
Glass Lewis said it was “concerned” about any payouts under annual bonus schemes “given the shareholder and wider workforce experience” last year.
“In our view, there is no reason as to why the company could not reduce the bonus to nil, a common practice amongst the company’s FTSE-listed peers,” Glass Lewis said.
Rivals including Winkworth repaid their furlough money after seeing a surge in property sales, thanks to the government’s stamp duty holiday.
“Although the company has no legal requirement to repay this government money, there are reputation[al] considerations to take into account,” ISS said. “Many UK companies have paid back such support before considering the payment of bonuses to executives.”
The two investor advisory firms have recommended that shareholders vote against Foxtons’ pay plan at its annual meeting on 22 April. Another advisory firm, Pirc, has said investors should abstain from voting, which is viewed as a form of protest against a meeting resolution. The Investment Association’s Ivis service has issued a “red top” warning to its corporate clients on the issue of pay at Foxtons, its highest level of alert.
Foxtons, which tapped its investors for £21m last April to “support the business though our reasonable worst-case scenario”, has also experienced a revival in its fortunes.
On Wednesday the company said that revenues had surged 24% year on year to more than £28m in the first three months of 2021. Revenues from lettings were up 6% to nearly £15m.
Budden received £1.6m in total remuneration last year, up significantly on the £1.25m he received in 2019. However, the company said that this was due to the introduction of a new share plan, and that his comparable year-on-year total remuneration had fallen to £1.03m.
“Our executive directors’ bonuses were cut by half compared to their entitlement, and the chief executive’s overall cash compensation was down more than a quarter compared to the year before,” said the spokeswoman.
“The vast majority of reward in the property sector is dependent on performance, and we believe it is right to reward hard work and results in a year when the business did well in very tough circumstances. Our aim has been to strike the right balance in recognising the situation while also acting in the best long-term interests of all our stakeholders.”
The High Pay Centre said that it was disingenuous to suggest that the government’s furlough scheme only benefited employees, adding that it was “shameless” to pay bonuses to bosses in such circumstances.
“The furlough payments are made to workers, but it’s an enormous subsidy to businesses too,” said Luke Hildyard, the executive director of the thinktank. “It potentially saves them money on salaries, redundancies, recruitment and training costs, as well as enabling them to restart operations smoothly as lockdown restrictions are eased. It’s pretty shameless for companies effectively pocketing public money to pay out six-figure bonuses to already hugely wealthy executives.”
Other companies taking furlough cash and making payouts
Cineworld The majority of Cineworld’s staff may still be on state-funded furlough schemes, but the top executives of Britain’s largest cinema chain have a new scheme that could see them allocated up to £208m in share awards in a post-pandemic recovery. Cineworld’s 5,500 UK staff have been out of work since October and the chain reported a record $3bn (£2.1bn) loss for last year as the pandemic took its toll. But if the company’s share price can return to pre-pandemic levels, its chief executive, Mooky Greidinger, and his brother and deputy Israel, will receive awards worth £33m each. Investor advisory services have branded the new policy as excessive, but only 30% of shareholders voted against the plan at a special meeting in January.
JD Sports Earlier this week, the retailer restarted dividend payouts to shareholders after profits bounced back due to a surge in lockdown demand for trainers and hoodies. But the company has no plans to return taxpayer cash. It has not revealed exactly how much government financial support it has received, but HMRC disclosures show it received between £6m and £12.5m in December and January alone. Peter Cowgill, JD’s executive chairman, said the furlough cash had “done what it was intended to do” – saved jobs and “prevented a large taxpayer burden from unemployment”. The company, which finished the year with almost £800m in the bank, also benefited to the tune of £38m from the government’s business rates holiday, according to property advisers Altus Group.
WH Smith In November, the newsagent chain scrapped a plan it had floated with investors that would have seen chief executive Carl Cowling receive long-term incentive shares worth about £4.5m. The proposal provoked anger among investors, one of whom told Sky News that the plan was “tone deaf”, given the retailer had furloughed thousands of employees, made 1,500 redundant and raised £165m from shareholders to support the business. In January, WH Smith also agreed to postpone a £25,000-a-year pay rise for each of the next three years for Cowling, after a third of shareholders voted against the company’s remuneration report at the annual meeting. The first increase was to have been for the period starting 1 July last year, in the depths of the pandemic.
Hollywood Bowl The tenpin bowling group angered its own investors after moving the goalposts of a bonus scheme linked to performance, to ensure that the impact of the pandemic did not affect a share payout to its executives. The change meant they got 81% of the bonus instead of nothing at all. The company had furloughed nearly all of its staff, and its directors had not taken pay cuts to reflect employees’ reduced furlough wage. At the time, the company said it had “received external advice to ensure that its remuneration policy strikes the right balance”.
Telecom Plus In June last year, the company, which supplies a range of utilities from broadband to gas and electricity, said it would pay a 30p-per-share final dividend, and subsequently announced a 27p interim dividend – payouts worth approximately £45m to its investors. It has previously said it used the furlough scheme to support a “limited” number of staff. Several other companies that used the scheme, such as construction group CRH and haulier Wincanton, have repaid furlough money back after opting for a dividend. Telecom Plus has declined to comment on whether it has done so too. Mark Sweney and Rob Davies