‘No free kick’ for JB Hi-Fi’s Richard Murray

The retailer has defended a bonus payment worth $1.38m to chief Richard Murray, despite shareholder opposition.

Mr Murray is already one step closer to his bonus, after JB Hi-Fi’s first-quarter results met expectations. Picture: Peter Wallis.

JB Hi-Fi chairman Greg Richards has defended the awarding of more than $1.38 million in shares to boss Richard Murray, despite one third of shareholders in the consumer electronics group rejecting the proposal.

But the recent acquisition of The Good Guys would not give a “free kick” to the CEO to hit his earnings targets, Mr Richards said.

Speaking after the annual general meeting in Melbourne this morning, where more than 34 per cent of shareholders voted against the approval of 48,096 “zero exercise options’’ to Mr Murray, Mr Richards conceded that three out of four proxy advisory firms had recommended to their clients to vote down the lucrative bonus deal.

But Mr Richards told The Australian last month’s deal to buy The Good Guys for $870m would not give an unfair boost to JB Hi-Fi’s earnings per share performance, that would then see the options over 48,096 shares vest to Mr Murray.

“The proxy advisers did look at the resolution, and I think out of the four maybe three advised against it,’’ Mr Richards told The Australian.

“There is a timing issue because people are assuming we now have The Good Guys, which we don’t have until later this year, and so we made the (options allocation to Mr Murray) pre acquisition and this is being voted on post acquisition.

“It’s a hindsight thing. The proxy advisers were just looking at the hurdles rates, so the hurdle rates were set back in June … there has been a change with the acquisition of The Good Guys and people think we are going to do better as a result, we hope to obviously.’’

Mr Richards said the inclusion of The Good Guys business within JB Hi-Fi would not give Mr Murray a “free kick’’ to reach his bonus hurdles.

“No, there is no free kick, he actually has to earn it and we don’t have a bucket of money here already, and that’s the presumption. The top hurdle rate is 8 per cent (EPS growth) and if we earnt 8 per cent on a compounding basis for five years I think shareholders would be very happy.’’

Mr Murray will win 40 per cent of his bonus if compounding annual EPS growth is 4 per cent, 50 per cent if EPS growth hits 5 per cent and all of his 48,096 shares if EPS growth hits 8 per cent.

Shares in JB Hi-Fi were 3.11 per cent higher at $28.88, at 12.37pm this afternoon.

Mr Murray is already one step closer to his bonus, after revealing in his trading update to shareholders at the AGM that JB Hi-Fi’s first-quarter results had met expectations, with total sales up 12.4 per cent and comparable sales up a very strong 8.3 per cent.

The consumer electronics and home appliances retailer also reaffirmed its total sales guidance of around $4.25 billion for fiscal 2017.

Mr Murray told The Australian after the meeting the first quarter lift in same store sales was one of the strongest in recent years, and that the retailer was positioned well for a strong Christmas.