Yahoo Finance Pearson boss John Fallon faces showdown over pay rise
Pearson boss John Fallon faces a fresh test of his leadership at the company’s shareholder meeting this week, after two influential investor advisers opposed his pay rise in the wake of a disastrous profit warning.
Mr Fallon and the Pearson board are due to face shareholders on Friday over the controversy, which comes after one of the worst of the education giant’s nearly 50 years on the stock market.
Institutional Shareholder Services, the world’s largest adviser on AGM voting, and its biggest rival, Glass Lewis, have urged clients to reject Pearson’s remuneration report at the meeting.
Mr Fallon was awarded a total pay package worth £1.5m last year, a 20pc increase despite overseeing a profit warning that triggered the biggest ever one-day fall in Pearson’s share price and a pre-tax loss of £2.6bn, also the largest ever suffered.
The heavy loss was caused by a write-down on an acquisition from the Nineties, but the profit warning was a result of a steep structural decline in Pearson’s education business. Its traditional core business of selling textbooks in the US is under pressure from cheaper options such as Amazon.
The warning in January was the latest and worst in a string of profit downgrades under Mr Fallon, who had maintained that its problems were caused by economic cycles rather than fundamental business challenges. Pearson shares have lost more than two thirds of their value in two years.
Mr Fallon’s pay was boosted by the board decision to award him a £343,000 bonus. Pearson said he achieved some targets, such as on cost cutting.
