Power station group Drax faces first pay revolt since MPs' report

The owner of Britain's biggest power station next week faces the first major boardroom pay revolt since MPs (BSE: MPSLTD.BO - news) called for remuneration committee bosses to quit if they fail to win overwhelming shareholder backing.

Sky News has learnt that Drax Group (Frankfurt: D9F2.F - news) , which operates the Yorkshire coal-fired power plant of the same name, is braced for substantial opposition to its 2016 pay report at its annual meeting on Thursday.

The revolt is expected to be fuelled by a recommendation from Institutional Shareholder Services (ISS (LSE: 0QRS.L - news) ), the powerful proxy voting adviser, to oppose Drax's remuneration report over share awards made to its finance chief.

A substantial protest would throw Tony Thorne, the former Shell (LSE: RDSB.L - news) executive who chairs Drax's boardroom pay committee, into an uncomfortable spotlight.

This week, the Business, Energy and Industrial Strategy select committee recommended that remuneration committee chairs should resign if their future pay policies are not approved by at least 75% of voting shareholders.

MPs on the committee also want ordinary workers to have a role on the panels which set boardroom pay, and for complex share incentive schemes to be ditched.

Although the Drax rebellion will focus on last year's pay report, rather than its new three-year pay policy, a big vote against will be hugely embarrassing for the company, given the current political climate.

The ISS report, a copy of which has been seen by Sky News, warns that Drax has awarded excessive shares under its Bonus Matching Plan to Will Gardiner, the chief financial officer who joined the board in November 2015.

"ISS' quantitative pay-for-performance model suggests that in at least one of the quantitative tests, pay outcomes have not been well aligned to performance and/or peers in relative terms," the report says.

The proxy adviser is regarded as a thorn in the side of major boardrooms because its recommendations can influence as much as 25% of a company's investor register.

That influence is likely to become even more potent if the MPs' recommendations are adopted by ministers, given that they would introduce a clear threshold for pay bosses to lose their jobs.

The AGM comes at a critical time for Drax, which is attempting to reinvent itself for a world no longer willing to use coal-generated power.

It has already converted about half its North Yorkshire plant to burn wood pellets, a move which has been heavily assisted by green energy subsidies.

Last year, the company, which is valued by the stock market at £1.27bn, acquired Opus Energy, a major supplier to the UK's business energy market.

A Drax spokeswoman said she was unaware of the content of ISS' report and insisted all payments made by the company were in line with its policy.

She (Munich: SOQ.MU - news) added that there had been "no undisclosed payments" to Mr Gardiner, and referred Sky News' enquiry to ISS.