Pearson, the struggling education group, was dealt a major blow on Friday after shareholders voted against the company’s executive pay package during its annual general meeting.
In a stinging rebuff, only 25 per cent of shareholders present voted in favour, while nearly 47 per cent rejected the company’s remuneration report for its executives, which awarded chief executive John Fallon a 20 per cent pay rise in 2016 despite Pearson’s record loss last year.
That figure fell short of the 50 per cent support needed to pass the measure. However the vote on the report is “advisory in nature” and Pearson is not bound by the results.
Investors also expressed their discontent in other ways, with a significant minority voting against both Pearson’s remuneration policy and against the re-election of remuneration committee chair Elizabeth Corley.
Pearson said in a statement that it was “disappointed” that the remuneration report was not passed.
“Naturally, we acknowledge this feedback and thank those shareholders who have already spoken with us and explained their reasons for not supporting the relevant resolutions,” it said. “The remuneration committee is committed to continuing dialogue with our shareholders to help shape the implementation of our remuneration policy going forward.”
Despite announcing Pearson’s biggest ever loss of £2.5bn for 2016 in February, Mr Fallon received a total payout of £1.5m last year — up from £1.26m in 2015.
His base salary remained broadly flat at £780,000, but the overall value of his pay package was boosted by an annual performance bonus of £343,000. The bonus came despite Pearson issuing its fifth profits warning of Mr Fallon’s four-year reign at the education group in January.
With revenues from the US higher education business down 18 per cent in 2016, the company also announced plans to slash its dividend this year, angering investors. The news drove Pearson’s share price lower, wiping billions of pounds off the value of the company.
Although the stock jumped as much as 15 per cent on Friday after the FTSE 100 group unveiled fresh restructuring measures, at £7.55 the shares remain well below the £15.17 peak they traded at just two years ago.