Bridgepoint, the newly listed private equity firm, came under fire because its independent directors paid ‘golden helos’ worth £ 3.25 million. Asset managers warned that the payments were ‘very irregular’ and created ‘unnecessary conflicts of interest’.
The issue of directors’ remuneration has cast a shadow over the company strong debut on the London Stock Exchange. Its share price rose 29 percent during Wednesday’s initial public offering, with investors accepting the investment alive prospects for the private equity industry.
In documents published as part of the IPO, the company revealed that Archie Norman, chairman of Marks and Spencer and a former MP, received a £ 1.75 million signing fee invested in Bridgepoint shares after tax. . He is also paid £ 200,000 a year for the role.
“Three other independent directors – Carolyn McCall, Angeles Garcia-Poveda and Tim Score – have been awarded a gold £ 500,000, as well as between £ 75,000 and £ 95,000 a year for their roles.”
An expert in corporate governance at one asset manager who bought the Bridgepoint Stock Exchange said the fund house was discussing the issue of directors’ golden hell with the board.
The stock market showed the wave of excitement over private equity, so the valuation was a good entry point for investors [I am] “It is not surprising that the price appears on the first day of trading,” he said. “However, this does not justify the extremely irregular arrangements for the non-executive officers.”
He added that it was important for the protection of minority shareholders that there was strong oversight of fully independent directors, especially given the company’s decision to appoint its CEO, William Jackson, as executive chairman, along with a limited free float of about 27 per cent company.
“The remuneration arrangements offered to non-executive officers create unnecessary conflicts of interest, which could undermine the effectiveness of the way in which the board fulfills its supervisory responsibilities,” the government expert said.
Another major asset manager said there were questions about whether the payments were detrimental to the directors’ independence.
He added that it was even more worrying when companies required directors to buy shares with the payments. ‘It’s more controversial. “It could jeopardize their ability to supervise properly,” he said.
Another management expert at a UK fund house has expressed concern about the sheer volume of payments. In recognition of a general debate over whether directors should be paid better while working for fewer businesses, he says Bridgepoint payments are excessive.
Neville White, head of responsible investment policy at EdenTree Investment Management, a UK asset manager who did not invest in the IPO, said the payments were “very unconventional and in our view contrary to best practice”.
He added that the UK’s corporate governance code, which applies to listed companies, “mandates for non-managers to be independent on appointment and any form of paid incentive jeopardizes their independence status”.
“I think it’s unheard of to have ‘signing fees’ for non-executive appointments,” he said.
Paul Lee, head of stewardship at Redington, an investment advisory firm, said the payout looked large.
He added: ‘I suspect they [the independent directors] will have a steeper hill to convince shareholders that they are fully robust in assessing management and managing management to account for their performance. ”
Bridgepoint said it was ‘delighted to have such a high-level board that offers a wealth of FTSE-listed company experience and diverse skills to support Bridgepoint in the next phase of its journey’.