ITV investors urge company to link bosses’ pay to production arm

ITV is under pressure from shareholders to more tightly link management pay to profits in its production business, which has been rapidly assembled by takeovers in recent years.

The ITV Studios unit, which as well as acting as an in-house supplier to Britain’s biggest commercial channel also makes programmes for rival broadcasters, including Poldark for the BBC, now accounts for nearly half the company’s sales but a much smaller share of profits.

Now investors are pushing for ITV chief executive Adam Crozier’s pay to depend more on improving the bottom line of the the production business, according to City sources.

Chairman Sir Peter Bazalgette is in the midst of discussions with shareholders over a new three-year pay policy, due to face a binding vote at the company’s AGM in spring. ITV “has changed from being very much advertising led to being advertising and studios led,” said one major fund manager, who declined to be named.

“If you think where the investment’s gone in the last few years, it’s gone in studios so we really want to make sure that a decent-sized part of the remuneration is based on the performance of that.”

Sir Peter is believed to have met with a number of major shareholders in recent months to canvas their views on executive pay. The former TV producer, best known for bringing the reality programme Big Brother to Britain, became head of the ITV board last May.

Sources said the new chairman is keen to ensure the broadcaster does not become embroiled in a dispute over remuneration.

“He doesn’t want to get this wrong, so that’s one where I think shareholders will get their way,” the investor said, adding that Sir Peter “does get” what shareholders are asking for.

Chairman across the FTSE 100 are in talks with investors on executive pay policies as they seek to avoid potentially embarrassing protests at AGMs.

The City has applauded Mr Crozier efforts to rebalance ITV so it is less reliant on volatile  and cyclical advertising revenues. However, with billions invested, investors are now understood to be keen to create incentives for management to boost profits from production in preparation for the next advertising downturn.

In its last full year results, ITV Studios reported a 33pc jump in revenues to £1.24bn, contributing to company total external revenues of £2.97bn. The broadcaster reported underlying earnings of £865m for 2015, of which ITV Studios accounted for £206m. ITV declined to comment.