Investors Question Ed & F Man'S L-Tip

Pay-outs under Man's L-Tip will be dependent on its post-tax return on capital employed and earnings per share. Shareholders will be voting on the L-Tip at an EGM on September 2.

One institutional shareholder said Wednesday that the lack of a comparator group places a significant onus on the remuneration committee to ensure that the return on capital targets remains challenging.

Man argues that companies' return on capital are not easily compared. It also states that there are very few with which Man can legitimately be compared.

The Greenbury Report, parts of which have been annexed to the rule book of the London Stock Exchange, stated that remuneration committees should consider criteria which measure company performance relative to a group of comparator companies.

 

Remuneration consultants said on Wednesday that Man's use of return on capital as the main judge of performance was very unusual: most companies prefer total shareholder return.

Man said that its proposed scheme has been sanctioned by the Association of British Insurers and that it had not received any expressions of concern from shareholders.

Its L-Tip will pay executives up to 100 per cent of their salaries in shares after four years if return on capital employed averages 24 per cent over the first three years.

Earnings per share growth must also increase by a total of 6 per cent more than inflation over three years. Executives will then have to wait another year before being able to sell their shares.

The proposed L-Tip also enables executives to buy shares with their annual bonuses. If the same three-year performance targets are met, Man will match the number of shares bought with the bonuses.

Man's annual report, published this week, discloses that executives received substantial annual bonuses last year. For example, John Kinder, managing director of sugar, was paid a bonus of 750,000 and a basic salary of 162,00. Harvey McGrath, group managing director, received a 500,000 bonus and a salary of 262,00.