Booker Prize Sponsor Faces Investor Revolt

The hedge fund manager which sponsors the Booker Prize is facing a major revolt from investors this week over changes to bonus targets for top executives.

Sky News has learnt that a number of leading City investors are to vote against Man Group (LSE: EMG.L - news) 's three-year remuneration policy as well as last year's pay report, in what could be one of the most substantial protests of the 2015 annual general meeting season.

Institutional Shareholder Services (ISS (Copenhagen: ISS.CO - news) ), an influential advisory firm, is recommending that investors oppose both resolutions at Friday's AGM.

Sources speculated that Man Group could see "no" votes of around 25%, although people close to the company insisted that both the binding policy and the advisory vote on last year's pay report would be approved.

News of the rebellion comes as it emerged the top 25 managers in the global hedge fund industry were paid more than $11bn last year, according to research by Alpha (Shenzhen: 002292.SZ - news) magazine.

The vast sum underscores the pressure felt by directors of listed groups such as Man to award pay deals which enable them to attract high-quality managers, a person close to Man insisted.

Investors have been irritated by Man's decision to increase potential payouts to executive directors, with its board determining that "their total 2014 compensation was at the low end of both CEO and CFO comparable market figures", according to the company's annual report.

Under the new policy, top executives would have the opportunity to earn three times base salary as a cash bonus - up from 250% - while deferred share awards could be made worth up to 525% of salary - up from 350%.

Man insisted that the changes would "not change the Board’s current rigorous approach to reward decisions" and said that "without this change, the board is very concerned that it will not be able to award the compensation appropriate to reward higher levels of performance and ensure that our remuneration remains competitive in the market place, a highly undesirable outcome for all shareholders with all its attendant risks".

The looming revolt comes despite a transformation in Man's fortunes under its current management team, with the share price up by 116% since the beginning of 2014, and profitability having increased by 75% during the last two years.

One City source said the sizeable protest vote highlighted the fact that even successfully performing companies were exposing themselves to shareholder opposition if they did not conduct comprehensive consultations about changes to pay policies.

In a note to clients, a copy of which has been seen by Sky News, ISS said that Man Group's new policy "seems to have been agreed at relatively short notice [and] includes material increases to award limits under the incentive schemes which do not appear justified based on the remuneration committee's explanation".

It said it was also recommending opposition because Man's pay committee "has discretion under the deferred long-term plan to adjust the size of ultimate awards based on benchmarking rather than performance, and unlike most other companies seeking approval for a new remuneration policy in 2015, clawback is not being introduced".

A Man Group spokeswoman declined to comment.

While not on the scale of the 2011 "shareholder spring" which saw a string of chief executives ousted in the wake of investor revolts, the current AGM season has seen a number of notable protest votes.

AstraZeneca (NYSE: AZN - news) , Centrica (LSE: CNA.L - news) and HSBC have been among the FTSE-100 targets of shareholder opposition to pay reports.

On Tuesday BG Group, which is in the process of being acquired by Royal Dutch Shell (Xetra: R6C1.DE - news) , saw 18% of votes cast against its pay report, largely related to the handling of the recruitment of Helge Lund, its chief executive.

Sky News revealed last month that RSA Insurance (LSE: RSA.L - news) , which holds its AGM later this month, was also facing significant opposition to its remuneration report and some directors.