Mark Kleinman: Pay compass points towards a defiant city

Mark Kleinman is Sky News’ City Editor and is the man who gets the Square Mile talking in his weekly City AM column. This week he tackles executive pay, Rightmove subs and firm YNAP window-shopping

Pay compass points towards a defiant city

Who says work doesn’t pay? That’s not been the case in the last year or so for the bosses of the UK’s biggest companies – and even more so for those at the top end of the FTSE-100. There was the usual, predictable hand-wringing from the High Pay Centre when it published data in August showing that median pay for FTSE-100 chief executives rose by 3 per cent in 2023 from £4.1m to £4.19m.

Those numbers, though, disguise another intriguing nugget: Farient Advisors, a boardroom remuneration consulting firm, has crunched the data and concluded that chief executives of FTSE-30 companies received significantly bigger pay hikes than their peers. Last year, the bosses of companies such as HSBC, Shell and London Stock Exchange Group soared by an average of 40 per cent to just over £7m.

In part, this was due to the 2021-23 long-term incentive plan cycle, which resulted in larger vesting quantums because of the uncertain period in which stock was granted during the first half of the pandemic. The lower stock prices at which share awards were made triggered larger-than-usual payouts three years later, Farient found, reducing the gap between the top third of the FTSE-100 and the S&P 500.

However, the resumption of more precisely calculated stock grants in the period since Covid-19 peaked is expected to result in more modest increases for the bosses of Britain’s biggest companies – absent changes to pay policies driven, at least partly, by complaints about the uncompetitive nature of UK CEO pay.

Stephen Cahill, Partner at Farient Advisors comments “Despite the increases in UK pay in 2023, there remains a significant gap between UK and US companies. Quantum is not the only issue: the UK has more drawbacks like bonus deferral, holding periods and post employment share ownership requirements which make the UK less attractive for executives.

As I reported on Sky News yesterday, Compass Group, the £41bn contract caterer, is now out consulting investors on a pay bump for Dominic Blakemore, its chief executive, that investors are interpreting as being calibrated around precisely this narrative.

Shareholders are largely, I understand, supportive of Compass’s proposals. More protests from high-pay campaigners loom.

Succession of Rightmove snubs a blow to Murdoch

You’d think Rupert Murdoch (pictured) had too many familial challenges on his plate right now to be engaging in an unfriendly takeover battle halfway around the world.

But no: even as he grapples with family members over the ownership of his media empire, the 93 year-old tycoon’s News Corp has been beaten into an unseemly retreat by the defence tactics of Rightmove, the FTSE-100 property listings portal. REA – which is majority-owned by News Corp – saw four proposals rejected by the Rightmove board, expressing growing anger at each snub.

Many of its institutional investors appeared to back that stance, with one telling me that only something “in the high 800s” would have been enough to win its support. REA was a long way short of that.

Few institutions broke cover to urge Rightmove to engage in talks, with Jamie Forbes-Wilson, a fund manager at AXA, the main exception: “We would agree that it feels a little opportunistic for REA to be coming along at this time, but it is also recognition that REA sees Rightmove as the high-quality business that we as long-term holders of the share think that it is,” he said.

Market sources say this wasn’t the first combination about which Rightmove was approached. Last year, they suggest, the company engaged in discussions about a nil-premium merger with Scout24, the Frankfurt-listed property portal, which failed to result in a deal. For its part, Rightmove denies the suggestion.

Shares in Rightmove have now settled at around 635p. As frustrated as it professes to be, REA should have tabled an offer which reflected a more compelling vision of the benefits of an Anglo-Australian combination. That’s what the M&A game is all about. Murdoch, REA’s ultimate owner, knows that as well as anyone.

Is MyTheresa about to try YNAP on for size?

Everyone knows that fashion is all about anticipating the latest trends. So too it is with online premium fashion platforms, which have been falling out of favour faster than a pair of flares at an Ibiza summer rave.

The sale of Yoox Net a Porter (YNAP), run by Goldman Sachs, is a case in point. An auction has been underway for at least six months, with private equity firms Bain Capital and Permira reportedly among the parties which sized up bids.

Industry sources now say that a deal with MyTheresa, the German online clothing retailer, has been all but stitched together for loss-making YNAP, which is owned by the Swiss luxury goods group Richemont. MyTheresa did not respond to three requests for comment, while Richemont declined to comment.

The transaction would not have been necessary if Farfetch, which was lined up to acquire a 47.5 per cent stake in YNAP, had not run into financial difficulties of its own, ultimately relying on a rescue takeover by South Korea’s Coupang.

If the MyTheresa deal does come off, that may buy the combined group some time, given that the acquirer is now valued at little more than $300m – scarcely 10 per cent of its 2021 IPO price in New York.

As the travails of many premium fashion companies have demonstrated this year – Burberry being the most obvious example – they don’t have the luxury of time on their side.