Goodman cops second strike as institutions turn on pay

The industrial property giant, led by Greg Goodman, is a standout in the property sector but its remuneration practices have prompted opposition.

Industrial property giant the Goodman Group has been hit by a second strike over its pay practices, with its board also copping hefty protest votes at its annual meeting on Thursday.

While a compulsory motion to spill the board was easily defeated, the near 29 per cent vote against the company’s remuneration report brought long-running investor disquiet about its excessive payments to a head.

Goodman chief executive Greg Goodman reaped a total package of $15.77m in the last financial year, and five other executives were paid more than $5m.

Goodman has ridden the industrial property boom, but its once soaring share price have come off in the market rout as funds managers have been de-rated. The company is still growing rapidly around the world, but higher interest rates have prompted a cooling of industrial property prices, although Mr Goodman said that the company was lowly geared, and while it did not want to be the biggest, it was positioned to keep rolling out prime facilities around the world.

Goodman chairman Stephen Johns blamed recommendations from two proxy houses – understood to be ISS and Ownership Matters – for the pay report being voted down.

The group also received a strike against its pay last year, and Mr Johns said the company had engaged with many investors earlier this year to obtain feedback to better understand their views. He put the protest partly down to objections about the size of long term incentives granted to top executives.

“While we received strong support for the LTIP structure, particularly in relation to four-year testing and 10-year vesting conditions, the primary issue raised by investors related to the quantum of performance rights which were granted last year to key management personnel, including the executive directors,” Mr Johns said. “This was due in part to differing approaches used in assessing the value of the proposed grants under the new 10-year plan, where the board had adopted an economic value approach rather than the face value approach more commonly used by the market,” he added.

Goodman Group founder and chief Greg Goodman reaped a total package of $15.77m in the last financial year, and five other executives were paid more than $5m. Picture: John Feder/The Australian

Mr John said investors supported the earnings per security testing hurdles the company incorporated in awards last year, but indicated that they should continue to be ambitious.

He defended the scheme, saying the board “firmly believe” the remuneration plan was instrumental in retaining and incentivising” its global managers. “While we have met the expectations of over 70 per cent of our investors, we received negative recommendations from two proxy firms, and, consequently, have not achieved the 75 per cent threshold required to avoid a second strike,” he said.

Mr Johns said the board “strongly disagreed” with the main concern expressed by the main proxy adviser that earning per security hurdles are not sufficiently challenging.

Goodman’s board has adopted ambitious EPS growth targets, with a threshold compound annual growth rate of 6 per cent and an upper level of 11 per cent per annum required for full vesting. This upper limit requires total EPS growth of 52 per cent over the four-year testing period of the 10-year plan.

“This will be a challenging target to meet under any circumstances, but particularly so in this volatile market environment,” he said.

Goodman’s board has now accepted face value as the primary determinant of quantum, and said the resultant fiscal 2023 awards to the chief executive top executives had been effectively slashed.

Mr Goodman said the company had another strong quarter and this year’s operating EPS growth is expected to be 11 per cent, which equates to $1.7bn in operating profit.

“We understand the market environment is more challenging moving forward, so we continue to be cautious in our approach to risk management,” he said.

But he added that companies were looking to drive efficiency and productivity out of their facilities. “So we’re realistic but also optimistic about the opportunities that will come our way.”

Goodman shares closed up 1.6 per cent, or 29c, at $18.18.