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Shareholders are starting to wake up to one of the more crass aspects of performance targets for directors’ pay. Thomas Cook highlights a regulatory failure already seen with Persimmon.

The guidance in the Accounting Regulations Schedule GC100: 4.4 states: ‘Companies are not required to disclose specific performance targets in the future policy table, but just explain how they would be determined.’ The justification for this is that information on the specific performance metrics for directors is ‘commercially sensitive’. This gives companies a smokescreen to avoid revealing performance targets.

Over 25% of investors at the Thomas Cook AGM opposed its remuneration report because of its refusal to explain adjustments to its CEO’s LTIP EPS target for 2015. Shareholders are saying: If we don’t know what the performance targets are, how can we judge whether they are sufficiently stretching to justify the large payouts they trigger? At Thomas Cook they may remember past bonus payments, including £6.3m paid to Harriet Green despite having worked for the Company for only two months that year. Thomas Cook is resisting giving any information until 2018 - after the LTIP award has been paid out. Shareholders want to know the targets in advance and so they should. How else can they be sure that pay is under control? This is indeed a sensitive subject for shareholders.

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