Wesfarmers seeks shareholder approval for $7.37m bonus for CEO Rob Scott

Wesfarmers shareholders will be asked at the AGM to vote for $7.37m in performance shares for CEO Rob Scott.

The Wesfarmers board is keen to keep CEO Rob Scott’s remuneration package competitive. Picture: Marie Nirme

Wesfarmers has cautioned shareholders that if they don’t approve the awarding of two tranches of performance shares worth $7.37m to its chief executive Rob Scott it could dent the competitiveness edge of his remuneration package forcing the board to consider alternative payment arrangements such as handing over the cash equivalent of the performance stock.

In the notice of meeting for the Wesfarmers annual general meeting, which will be held at an exhibition centre in Perth on October 21 and behind Western Australia’s Covid-19 locked borders, the company is seeking shareholder approval for $3.684m in deferred performance stock and $3.684m in performance shares.

Investors however won’t be missing out on the cash splash, with the agenda item following Mr Scott’s remuneration bonus to be on the $2 per share capital return that will shower all shareholders with a total of $2.27bn in the special distribution.

According to the notice of meeting Mr Scott, who has presided over an almost doubling of the Wesfamers share price since he became CEO, could be awarded Key Executive Equity Performance Plan (KEEPP) deferred shares up to a maximum value of $3.68m and KEEPP performance shares up to a maximum value of $3.68m.

The shares will vest linked to Mr Scott’s performance over four years and based on key measurements of Wesfarmers’ total shareholder return relative to the S&P/ASX 100 Index (80 per cent weighting) over the performance period and Wesfarmers’ portfolio management and investment outcomes (20 per cent weighting).

However, the notice of meeting says if shareholders vote against the remuneration package it could make Mr Scott’s salary uncompetitive and lead the board to top up his pay with cash.

“In that circumstance, issues may arise with the competitiveness of Mr Scott’s total remuneration package and alignment of rewards with other executive KMP in the Group. “The board would then need to consider alternative remuneration arrangements for Mr Scott which are consistent with Wesfarmers’ remuneration principles, including providing an equivalent cash long-term incentive subject to the same risk of forfeiture, performance conditions and performance period as described above for the grant of the KEEPP shares.”

A spokeswoman for Wesfarmers said this had been standard practice for Wesfarmers for many years.

“As per previous years and consistent with market practices, we maintain the flexibility to consider alternative remuneration arrangements to ensure the competitiveness of the managing director’s total remuneration package.”

At last year’s AGM, the agenda item on awarding performance shares to Mr Scott got a 97.15 per cent vote in favour from shareholders.