Peter Isola, a non-executive director at GVC Holdings, resigned after a shareholders revolt over executive pay in May 2016. 44% of the shareholders voted against a new executive remuneration plan. The shareholders’ concerns also included issues of independence for directors of the company, which bought out Ladbrokes, a top UK sportsbook and online gaming operator, in March.
Mr. Isola became a lightning rod for the shareholders’ concern and anger, though his compensation was only 1% of that given to GVC’s top board members. While CEO Kenneth Alexander also came under fire during the shareholders revolt, his position at the company was never at risk.
Given his status as a relative outsider, Peter Isola became a centerpiece of the debate. Peter Isola is the founder of the Isola Group, a law firm which has held an advisory role with GVC Holdings for the past 5 years.
In 2016 and 2017, GVC paid Isola Group €209,858 and €100,000, respectively. Shareholders criticized the payment to a non-executive director, because they said a non-executive director’s independence could be “potentially impaired” by maintaining a “material business relationship” with the company he advised. 43% of the shareholders voted against Peter Isola being reappointed as a non-executive director. That vote of no-confidence led to Isola’s resignation.
ISS Led the Shareholders Revolt
The Institutional Shareholder Services (ISS), an influential proxy investor in GVC Holdings, led the shareholders revolt. GVC Holdings defended its payments to Peter Isola. GVC disagreed with ISS’s stance on the Isola payments, stating GVC “does not regard them as sufficiently material” to his role on the board.
Despite the disagreement, GVC said it would take actions based on the vote. Lee Feldman, himself a non-executive director, said, “The board has been made aware through communications during the voting process of shareholder concerns relating to Peter Isola’s perceived independence. To address these concerns Peter will step down with immediate effect from the remuneration committee and we will engage with dissenting shareholders on this issue after we have reviewed the voting analysis.”
Alexander and Feldman Recieved €30.7m
The rewards for the other executives were far greater. Chief executive Kenneth Alexander and Lee Feldman collected a combined €30.7 million (£26.9 million) between them. The sum angered many of the biggest shareholders, who advised their investors to vote against executive payments.
Glass Lewis and Pirc joined with ISS in advising their investors to vote against the pay rewards. Glass Lewis said Kenneth Alexander’s payment was “excessively disproportionate”.
Changed December 2017 Remuneration Agreement
The anger stemmed from the fact the pay was much larger than what had been agreed upon in December 2017. At the time, GVC announced new remuneration arrangements. To have the company change the announced pay only 6 months later led to the widespread revolt, which included some of the top investment groups in Europe.
Kenneth Alexander and the GVC Holdings executives believed they deserved rewards, because of the £5 billion takeover of Ladbrokes in March 2018. GVC directed the Ladbrokes sale received almost immediate approval from the UK’s regulators, which led to a promotion of GVC Holdings to the prestigious FTSE 100, which is the United Kingdom’s blue-chip index.
Jane Anscombe Statement
Apparently, nearly half of the shareholders were not so impressed by the FSE 100 rating that they would agree to a massive pay raise. Jane Anscombe, who received 11% nay votes on her retention on the board, said in a prepared statement, “We acknowledge this feedback and thank those shareholders who have already spoken with us and explained their reasons for not being able to support this resolution.”
“We have sought to balance the views we have heard from shareholders with the clear need to appropriately reward and retain our successful management team, and we are committed to continuing this dialogue with our shareholders.”