In a fairly rare occurrence in today’s corporate world, online gaming and financial technologies provider Playtech PLC (LON:PTEC) has seen its shareholders reject the company’s proposed Annual Report on Remuneration at the company Annual Meeting held yesterday in the Isle of Man.
Except in rare circumstances, annual meeting board resolutions are usually adopted (by wide margins) at large publicly traded companies. However Playtech – which has undergone a big change in its ownership structure over the past year – has seen its new institutional shareholders flex their muscles and refuse to rubber stamp a large raise given to Playtech CEO Mor Weizer, plus generous bonus and long term incentive plans for senior management. Especially, given Playtech’s disappointing results in the latter stages of 2017.
Playtech was for a long time effectively controlled by founder Teddy Sagi. However Mr. Sagi has been diversifying his investments of late, selling down his stake in Playtech to below 10% in mid 2017. Three of Playtech’s four largest shareholders are now institutions including household financial names T. Rowe Price – now Playtech’s largest shareholder at 10.2%, Morgan Stanley (NYSE:MS) with a 5.8% holding, and Paris based asset manager Boussard & Gavaudan which acquired 13 million Playtech shares from Teddy Sagi’s Brickington holding company in March 2017 for a 4% holding.
The rejected Playtech remuneration policy called for healthy bonuses of 200% of salary for the CEO and 150% of salary for other senior executives, with 25% of the bonus deferred into shares for two years. In addition to the bonus, the company’s Long Term Incentive Plan added another maximum of 250% of salary, with normal grants of 200% and 150% of salary in performance shares for the CEO and CFO respectively. Plus, a Pension totaling 20% of salary.
Demonstrating the effect of all the bonuses, in 2017 CEO Mor Weizer had a base salary of €950,000, but ended up with total comp of several times that, or €4.2 million. CFO Andrew Smith’s base salary of €385,000 became more than €1.1 million in total comp.
Apparently, the company’s large institutional shareholders were not very happy with Mr. Weizer’s compensation moving up by 79% from €2.3 million in 2016 to €4.2 million in 2017, in a year which as noted wasn’t a banner year for results.
Technically, Playtech didn’t need to seek shareholder approval for its executive compensation policies. For UK incorporated companies, there are requirements in relation to the content and approval of the directors’ remuneration report. However as an Isle of Man incorporated company, Playtech is not subject to these requirements. Nevertheless, the Playtech board decided that shareholders would expect the company to voluntarily mirror the requirements of the UK legislation applicable to a premium main market listed company.
In a statement, the Playtech board replied to the surprising rejection:
The Company has considered the reasons for the results of today’s meeting, reflected in the voting results regarding the remuneration report and the re-election of John Jackson, the Chairman of the Remuneration Committee and Alan Jackson, Chairman of the Board, and will take these into account in the implementation of its remuneration policy going forwards. Playtech intends to review the composition of its Remuneration Committee and discussions are also underway with potential candidates to join the Board as a non-executive director.
Playtech Chairman Alan Jackson said:
We have listened to our shareholders and we understand their concerns. We are committed to working with shareholders to address the issues raised going forward.