GVC Holdings Faces Shareholders Revolt Against Top Executives
GVC Holdings shareholders are revolting over the company’s compensation for top executives, which the shareholder organizations decried as “excessively disproportionate” after it was announced that only two of its bosses would receive $90 million. GVC Holdings bought Ladbrokes in March 2018, causing GVC share prices to increase in the months since.
Since 2016, GVC has awarded its chief executive, Kenneth Alexander, $60 million in share options. The chairman, Larry Feldman, has also picked up some large share options worth another $ 30 million. GVC’s executives justified their decision by attaching their compensation to the company’s share price, which recently hit an all-time high.
Top shareholders were angered further, because Kenneth Alexander promised an entirely different compensation plan only months ago – during a December 2017 shareholders event. To see a new remuneration plan announced only months later seemed to particularly outrage the top shareholders.
Kenneth Alexander Profile
Kenneth Alexander has been at the front of GVC since 2007. He is responsible for two important acquisition deals during the past two and a half years. In February 2016, GVC purchased fellow online gambling operator bwin.party Digital Entertainment in a £1.1-billion deal.
Earlier this year, Alexander led GVC Holdings acquisition of British bookmaker, Ladbrokes Coral for £3.2 billion in hopes of expanding its footprint across the UK retail market. Before that addition, the GVC had operated solely in the online gambling niche.
The company headquarters is based out of the Isle of Man, but many operations are handled out of Gibraltar.
Glass Lewis and Pirc Revolt
The GVC shareholder advice bodies Pirc and Glass Lewis are campaigning against the payout and are hoping to convince investors to vote against the pay report at the company’s annual meeting in Gibraltar. According to Glass Lewis, Alexander’s pay is roughly 550 times that that is paid to average employees. Lewis said it was “excessively disproportionate”.
Luke Hildyard, director of the remuneration thinktank, the High Pay Centre, said that it would be outrageous if GVC Holdings continued to award such astronomical pay packets. More than 45% of the company’s investors failed to support the GVC pay policy at its AGM last year.
The protest vote came as a direct result of Alexander’s total pay reaching a massive $26 million for 2016, which is slightly more than the $24 million that he received in the most recent remuneration report for GVC Holdings.
Luke Hildyard Analysis
Luke Hildyard gave his analysis of the coming crisis, saying, “Clearly they’ve completely disregarded the strong vote against last year and are continuing with a similar approach to pay. You’d hope that there will be an even stronger vote against this year.”
Hildyard pointed out that investors are given the power to vote on company pay policies once every three years. Such votes are deemed more like a recommendation than to make any official change.
The High Pay Centre analyst said, “This case demonstrates that even when shareholders do oppose egregious awards, which doesn’t happen often enough, the company doesn’t have to do anything about it.”
In theory, GVC shareholders waved through last year’s payouts, because they were considered a part of the terms of its $4.2 billion takeover of Ladbrokes Coral, which won a tremendous amount of support from investors.
Corporate Remuneration Trends
Huge payout deals is a trend among several large companies at the moment. Corporate remuneration has brought a lot of frustration, because many shareholders believe executives are robbing investors by voting their own huge pay increases.
For example, Jeff Fairburn, chief executive of the housebuilder Persimmon, ended up returning more than $33 million of the $133 million plus bonus he received as a result of widespread anger and protest. Shareholders also shared their frustrations after the $56 million that the four directors of Melrose received. Melrose is a buyout firm that recently picked GKN, a historic engineering company.
Still, GVC’s investors’ anger towards the lavish payouts has not quite reached the level of the so-called Shareholder Spring of 2012, where investors in several big companies refused to approve the remuneration packages of some of their top executives, investors have continued to protest against top companies like Unilever, Direct Line, and Inmarsat.
The annual meeting for GVC is set for June 6 and will allow for a fresh opportunity for disgruntled investors to voice their anger and disapproval over how the company continues to award uncapped pay deals to their executives. GVC Holdings has seen a great increase in value of their investors shares since they have been under the direction of Kenneth Alexander and Larry Feldman. The company’s shares have reached a record high of $14 in recent weeks.