Sainsbury’s forced to defend pay rises
J Sainsbury was forced to defend its pay scheme at today’s annual meeting amid complaints about pay rises for chief executive Justin King.
The supermarket chain, which saw off a private equity led takeover bid earlier this year, was also at pains to reassure worried shareholders at the AGM at the Queen Elizabeth II Centre in London that it would hold onto its largely freehold property assets, worth about 8.6bn.
One private shareholder asked: “Why don’t you raise the dividend to the level of three years ago … before you grant any [pay] increases to Justin King?”
Sainsbury’s chairman, Philip Hampton, admitted that executive pay had been rising significantly more than inflation, but he added: “It’s just a fact of corporate life.”
He said that Mr King had until last year received pay rises only in line with inflation - highly unusual for the corporate world. Last year, however, Mr King, who has led a turnaround of the business over the past three years, saw his total pay package rise from 1.4m to 1.9m, and this year will see his basic pay go up 17%.
Mr Hampton said Mr King’s increase in the past 12 months only “takes him to the median” on the pay scale and justly rewards the “excellent job he’s been doing”.
The group’s pay scheme was voted through by 98.7% of shareholders.
The Iranian property tycoon Robert Tchenguiz has been pressing the board to split the group into an operating business and a property company to unlock value for shareholders. He is thought to have raised his stake in Sainsbury’s to about 10% last month.
But Mr Hampton reiterated: “Property has always been at the heart of Sainsbury’s business. We believe strongly that our estate still has considerable development potential … As we move, as we must, from recovery to growth, we believe it is in shareholders’ interest to retain ownership of a high proportion of our properties.” He added that Sainsbury’s competitors also own large freehold estates.
Fielding several questions on the issue, Mr Hampton insisted: “We do not believe it is appropriate at this moment to split the company into an operating and a property company.”
John Wendip, a private shareholder, asked the company for an “undertaking to consult all shareholders if there is a major change on property.”
Robert Muriel, another investor, asked: “May we have your assurance that the family are solidly behind you in that [issue], as they are a major shareholder?”
Mr Hampton pointed out that Lord John Sainsbury had spoken out in favour of the group keeping its property base.
He was also asked about takeover speculation surrounding other shareholders who have built up large holdings, but merely said: “Their attitudes to what they are doing are really for them … Management’s job is to run the business; we absolutely do not run our shareholders.”
An investment fund backed by the royal family of Qatar recently became the largest shareholder in Sainsbury’s when it increased its stake to 25% from 18%. Sainsbury’s previously fought off a takeover bid from a private equity consortium led by CVC.
