Kogan cops first strike vote over $80m options award

Kogan founder Ruslan Kogan and CFO David Shafer have been awarded options packages worth around $80m combined, but not before shareholders vented their fury.

Ruslan Kogan. Picture: Hollie Adams

Kogan.com chief executive Ruslan Kogan and chief financial officer David Shafer will be rewarded with a controversial options incentives package worth $80m in the current market.

But the windfall has come at the cost of a “first strike” at its annual general meeting on Friday as shareholders revolted against the decision to shower the pair with in-the-money options.

Addressing the AGM, chairman Greg Ridder called the decision by proxy advisers to recommend a vote against the remuneration report as “perplexing”. He said media coverage of the highly valuable options to be handed to Mr Kogan and Mr Shafer had been a “distraction”.

Mr Ridder also noted that Kogan.com’s larger shareholders, who had been with the company for some time, were mostly in favour of the highly valuable options package being offered to the CEO and CFO. It was smaller and newer shareholders in the company’s register that had mostly opposed it, he said.

But Mr Ridder conceded that Kogan.com should have called an extraordinary general meeting in May, when the options package was first unveiled, to gain shareholder support for the executive incentives.

“With the benefit of hindsight I think if the EGM had been held shortly after the announcement of the retention options proxy advisers and media would not have been distracted by the recent gains in share price when considering the value of the executive awards at the time they were announced,” he told shareholders.

A resolution to hand over 3.6 million options to Mr Kogan and 2.4 million options to Mr Shafer if they stayed at the helm of the online retailer for three years - with a strike price of $5.29 per share - sparked immediate rebuke when it was unveiled in May, with all proxy adviser firms recommending a vote against it at the AGM.

The options were immediately profitable in May, with Mr Kogan’s options currently worth $46.9m and Mr Shafer’s $31.27m.

Further infuriating some shareholders was the statement from Kogan.com that even if shareholders rejected the options being awarded, the pair the company would award the incentives anyway.

It all came to a head at the online retailer’s AGM on Friday where Kogan.com was slapped with a 42.51 per cent vote against the lucrative $80m package, meaning the resolution passed and the pair would have access to the incentives. There was a 56.35 per cent vote in favour of the options.

However, many aggrieved shareholders vented their displeasure with the structure and payout of the incentives and turned their guns on the resolution relating to the remuneration report.

At the AGM chairman Mr Ridder said Kogan.com would likely receive its ‘first strike’ with a 43.74 per cent vote against that AGM resolution.

In his address to shareholders Mr Ridder defended the plan to award $80 million in options even if the resolution was later rejected by shareholders, saying the pair had not received long-term bonuses in four years.

“As you know, items on today’s agenda relate to the long-term incentive arrangements for the executive directors, who otherwise have not received any LTI (long term incentive) awards in the four years since IPO and will not receive any other form of LTI over the coming three years,” Mr Ridder said.

Last month Mr Ridder told The Australian Mr Kogan and Mr Shafer deserved the multi-million dollar incentives and that they were crucial in retaining their services. He said the pair were the best online retailers in the country.

In a trading update provided at the AGM by CEO Mr Kogan, he said for the financial year-to-date, gross profit has grown faster than gross sales, driven by strong performance from its product divisions and Kogan Marketplace. He said both gross Sales and gross profit outperformed the equivalent prior period by 99.8 per cent and 131.7 per cent respectively.