INVESTORS in Weir Group have voted in favour of a major change to its executive remuneration policy.
A resolution tabled by directors at the Glasgow-based engineering giant’s annual meeting saw more than 90 per cent of the votes cast support the move to a restricted share award scheme.
Restricted share awards are said to be easier for investors to understand because they link payments to longer term share prices, instead of performance conditions that can be hard to understand.
The new Weir policy, which replaces its previous LTIP (long-term incentive plan), will see executives receive a smaller award each year than under the LTIP. It extends the holding period before share awards vest to seven years and enhances shareholding guidelines for the chief executive and chief financial officer to 400% and 300% of salary. The policy is underpinned, meaning there is “no payment for failure”.
The new policy won support from investors two years after Weir scrapped moves to introduce a “hybrid” scheme, which effectively combined elements of LTIP and restricted share award schemes.
Speaking after yesterday’s vote, which saw 92.35% of voted shares come out in favour of the new policy, chairman Charles Berry said: “Our interest in this is Weir. We are looking to do the right thing for Weir, and what we had before was broken. It didn’t work. Now, you’re in an engineering company, you’re looking at a Glasgow engineer.
"When something doesn’t work, a Glasgow engineer looks to fix it. And that’s what this is about.” Mr Berry noted that, under the previous Weir LTIP scheme, pay-outs had varied from 100% to zero largely because of the cyclical nature of the markets it operates in, chiefly minerals and oil and gas.
He added: “What we looked at is a way that provides greater alignment between business performance, management incentives and value for shareholders.
“A few years ago, we quickly identified that restricted stock does that.”
READ MORE: Weir cheers investors with major US deal
Yesterday’s annual meeting saw all resolutions tabled by Weir passed. Those included shareholder support for the introduction of a new all-employee share plan, which from 2019 and 2020 will see free shares given to Weir’s 15,000 employees; shares will also be given to the 3,000 staff who will join from ESCO, the US engineering company it acquired for $1.3 billion earlier this month.
Commenting on that deal, which is the largest in Weir’s history, Mr Berry said there was an “uncanny” cultural commonality between the two companies. And despite the size of the acquisition, he said Weir would always remain on the look-out for other opportunities.
Elsewhere, Mr Berry explained the board had reached a decision to seek a buyer for its flow control division after concluding that the capital demands on the group should be allocated more to it dominant oil and gas and minerals businesses. While he described flow controls as a good business with good people, he said it would be better served by a new owner which could provide the investment it requires.
So far, the company has seen no effect from the Brexit process in terms of its ability to attract skilled engineers, Mr Berry said.
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