London based online FX, CFDs and spreadbetting broker CMC Markets Plc (LON:CMCX) issued an interesting statement following its Annual General Meeting last week, which also coincided with the release of CMC’s quarterly Trading Update.
While stating (as is certainly usual) that all the resolutions set out in the Notice of Annual General Meeting were duly passed as the meeting, CMC noted that when it came to the Directors’ Remuneration Policy ‘a significant minority of shareholders voted against it‘.
What that really means is that the majority of independent shareholders voted against the proposal for executive compensation and bonuses. CMC founder and CEO Peter Cruddas and his family, who still own the bulk of CMC stock, voted in favor of course pushing the grand total above the required 50% to pass the resolution.
In response, the company stated that the Board believes that the new policy is “fundamental in supporting the delivery of the company’s strategy” and was devised following a detailed consultation process, with key shareholders and proxy advisers. The company did state, however, that the Remuneration Committee noted the concerns raised by shareholders, and will reflect on feedback received.
The new executive pay plan included a more-than-100% raise for Mr. Cruddas to above £845,000 including a large bonus. For other executives, the plan increased maximum (potential) bonuses from 245% to 300% of base salary, and shortened the performance period for most of the awards down to one year, from three years previously.
The shareholder backlash at CMC comes at a time when the company’s performance (and share price) has been lagging its main rivals in the UK online trading market, IG Group and Plus500. Both IG and Plus500 have reported blowout quarters over the past year, and a healthy uptick in share price, largely on the back of interest in cryptocurrency trading which has also led to large numbers of new clients signups. CMC was much slower in introducing trading in Bitcoin, Ethereum et al, launching a limited lineup in March of this year for non-retail traders, and just last week opening crypto trading up to retail clients. As of this Wednesday, August 1, leverage on crypto trades will be limited to 2x in Europe in conjunction with new ESMA rules governing CFD trading.
CMC went public in early 2016 at £2.40 per share. Although they have recovered somewhat from 2017 lows, the shares remain well under water at £1.95. Plus500 is trading near its all-time high in the mid-£18’s, while IG is near a 52-week high and is nearing its all time high in the mid-£9’s.
The Financial Times has reported that proxy advisory firm Institutional Shareholder Services (ISS) had been advising shareholders to vote against the remuneration policy prior to the Annual Meeting, considering that CMC’s justification for the proposed changes was not sufficiently compelling. ISS apparently also recommended to shareholders to vote against the non-binding pay report resolution over serious concerns about the company’s remuneration practices. FT‘s report stated that ISS said the company had “materially reduced the PBT [profit-before-tax] targets within its bonus arrangement, resulting in a full payout, without providing any information”.