Scentre hit by AGM pay protest as cashflows return

Westfield owner Scentre suffers ‘first strike’ as proxies lead AGM vote against executive pay, while mall cash flows return.

Scentre CEO Peter Allen says Westfield’s 42 shopping centres are on a recovery path after the coronavirus crisis. Picture: Aaron Francis

Scentre Group, owner of the local Westfield empire, has suffered a significant vote against its remuneration report at its annual meeting on Thursday.

Scentre was slugged with a first strike as 51 per cent of proxies voted against its remuneration report, reflecting widespread dissatisfaction with how it has structured payments to top executives. A second “strike” next year could trigger a board spill.

A proposal for an issue of performance rights to CEO Peter Mr Allen also drew a hefty 27.2 per cent protest vote, but was passed.

There was also a 9.6 per cent vote of against the election of director Margie Searle.

Earlier, chairman Brian Schwartz said the company had expected a substantial protest vote

against the company’s pay practices, driven by proxy houses, with ISS and CGI Glass Lewis advising against the report.

“We are disappointed given the time and focus the board devoted to these important issues on your behalf and the consideration we have given to the outcomes the group and management delivered in the most uncertain and complex operating environment,” Mr Schwartz said before the vote was taken.

He defended Scentre’s pay structure, saying top executives and the board had cut their payments by 20 per cent at the height of the pandemic for three months.

Mr Allen has not had an increase since taking on the role in 2014 and short-term at-risk remuneration was reduced substantially for Westfield’s top ranks, he added.

There will also be no payouts under existing schemes for years from 2018 through to 2020, which Mr Schwartz said effectively eliminated the company’s long-term retention strategy.

The board made one-off payments last year of equity-based retention payments to top executives including Mr Allen who received close to $2.9m.

In one of the first signs that Scentre is turning its attention to life after Mr Allen’s tenure ends, Mr Schwartz said there was a process that included external advisers to help assess and further develop executive skills, “to ensure that when the time is right, we have appropriate senior management succession in place including looking outside the organisation”.

Mr Allen confirmed that Westfield’s 42 shopping centres were on a recovery path after the coronavirus crisis.

He also reaffirmed distribution guidance given at the start of the year and reported healthy cash flow momentum this year, with gross rental cash inflow for the March quarter running at in excess of $600m.

Scentre’s operating profit and FFO for 2020 were about $765m or 14.7c per security, which included a credit charge of $304m, relating to the financial impact of the pandemic.

Despite pressure from major chains for turnover-based rents, Mr Allen said the structure of Westfield’s leases had not changed and remained based on the mutual agreement to pay a fixed-base rent.

“Whilst COVID-19 uncertainty remains in 2021, subject to no material change in conditions, the group expects to distribute at least 14 cents per security for 2021,” he said.

Mr Allen said the distribution was expected to continue to grow in future years but the group plans to retain earnings to cover operating and leasing capital expenditure, fund strategic initiatives and reduce net debt.