Listed house builder Cairn Homes has scaled back future potential payouts for its chief executive and co-founder, Michael Stanley, under a long-term bonus scheme after a number of significant shareholders raised objections.
The company consulted all of its large shareholders over plans to bring Mr Stanley into Cairn’s long-term incentive programme, for which he previously was not eligible.
Cairn's chairman, John Reynolds; and non-executive director Linda Hickey, who chairs its remuneration committee, floated a proposal to bring Mr Stanley into the scheme with a potential annual award worth up to 200 per cent of his annual salary, as the board believed his existing pay was below market rates.
Mr Stanley previously was not eligible for the programme because, as a co-founder of Cairn, he was tied to a founders' share scheme that runs until 2022. Under the lucrative founders' scheme, Mr Stanley, his brother Kevin Stanley and non-executive director Alan McIntosh were due to receive a fifth of total shareholder returns for seven years from Cairn's flotation in 2015, if it hit certain targets.
The founder scheme allowed the trio to convert 100 million so-called “founder shares” into ordinary stock over the seven years. By mid-2018, 80 per cent of those shares had been converted and between them, the trio raised at least €50 million selling shares between September 2017 and April 2019.
Compromise deal
According to a note in its annual report released this week, some large shareholders consulted by Mr Reynolds and Ms Hickey objected to Mr Stanley being allowed into the incentive programme in 2021, while others believed 200 per cent was too high. Cairn says, however, that despite the objections, a majority of large shareholders were supportive of the mooted plan.
The company appears to have struck a compromise deal to keep all sides happy, bringing Mr Stanley into the incentive programme this year, a year earlier than planned, but at a maximum annual award level of 150 per cent instead of the original proposal of 200 per cent. Ms Hickey says this reflected the “totality” of shareholder opinions. Mr Stanley has agreed to cancel future payouts under the founder scheme.
The annual report also reveals that Mr Stanley's total pay packet almost halved last year to €520,000. Chief financial officer Shane Doherty, who joined in April as the pandemic took hold, was paid a total of €510,000.
Their annual bonuses – a separate scheme to the long-term incentive programme – were deferred for 2020 due to the pandemic, which also led to the axing of the shareholder dividend. Cairn says it is reinstating the annual bonuses for 2021, with Mr Stanley in line for a payout on this scheme of up to 150 per cent of his salary, while Mr Doherty stands to gain up to 115 per cent.
