What is a CEO *actually* worth?
The business news that matters.
Hello and welcome to the latest edition of Off to Lunch…
As warmer weather threatens to drift towards the UK this coming week, elsewhere it seems a storm is brewing over online grocer Ocado’s CEO. The company’s co-founder Tim Steiner is in line to receive a bonus worth up to £14.8m, but some shareholders are not happy, calling it “excessive” and part of “egregious remuneration practices”.
This has become an almost annual tradition. In 2022, almost 30 per cent of Ocado’s shareholders rejected the company’s overall remuneration policy and last year just over 30 per cent voted against the retail giant’s executive bonus and pay amid the background of a hefty share price fall.
This year’s vote, which is due to take place today, is expected to spawn similar disinterest. On the table is an enhanced multiplier scheme that would see Steiner bag a bonus of up to 1,800 per cent of his £824,570 base salary (£14.8m). While the figure on the table is nothing short of staggering, it would actually end up benefiting the very people voting down the move.
One of the metrics it’s linked to its share price. It broke the £29 mark during the pandemic but has now dropped to £3.56. For Steiner to net his full proposed bonus the share price would need to hit £29.69 in three years’ time. Should that target be reached, shareholders would see their investment increase in value by 734 per cent.
Ocado is not the only firm facing questions over CEO pay and bonuses. Over the weekend, the ever-vocal Ryanair chief Michael O’Leary hit back at critics of his proposed €100m (£86m) bonus. The amount, according to a 2019 agreement, would be triggered if the Irish-listed airline’s share price, which is currently €20.35, hits the €21 threshold and stays there for 28 days.
In the interview, O’Leary said:
“If I do get it [the payout], all the City types will be railing against excessive executive pay and I’m not putting up with any of that mewling nonsense. Footballers are getting half a million a week. Pep [Guardiola, Manchester City manager], who I think is a genius and deserves every penny, is getting £25m a year. Klopp [Jurgen, Liverpopl manager] too – and nobody says boo.
“Yet some guy running a serious business employing 20,000-plus people gets paid £5m or £10m and it’s suddenly excessive.”
Pharma giant AstraZeneca, social media firm Reddit and Telsa are among the listed companies coming out to defend their leaders’ proposed pay in the past few weeks. It is once again putting the subject of CEO pay top of mind.
This is something all business leaders should be considering, no matter the size of their company. Fair pay says a lot about what a company values and its culture. CEOs have a tough job and they should be paid commensurately. But it’s always worth analysing what they are really worth.
Podcast…
The new episode of our Business Leader podcast looks at UK fintech Tide. In 2018 its founder, George Bevis, stood aside as chief executive and was succeeded by Oliver Prill. Since then, Tide has grown rapidly and transformed from a promising financial technology start-up to a company whose online banking services are used by one in 10 small and medium-sized businesses in the UK.
Prill discusses the challenges of becoming chief executive, how to disrupt the financial services industry and why regulators may hold back innovation in the UK.
You can listen to the episode on Substack here, Spotify here and Apple here
Other stories that matter…
1. Second-hand fashion marketplace Vinted has posted an annual profit for the first time. Founded in 2008, the Lithuanian start-up has ridden the wave of popularity of sustainable fashion reselling and taken the crown as Europe’s largest online marketplace. You can read more here.
2. Banking challenger Monzo has agreed terms with Hedosophia, one of the world's best-known technology investors, to become a major shareholder. The raise from the investment powerhouse, which was an early backer of Airbnb and Uber, is the finishing touch on a £500m funding round and makes it one of the largest fundraising rounds achieved by a British tech firm. You can read more here.
3. New estimates from The Centre for Economics and Business Research has revealed that potholes cost the UK economy £14bn a year. The damage figure, which took into account repair costs, accidents, driver delays and higher emissions, points to the effect of reduced spending on road maintenance across the country. You can read more here.
4. Spotify founder Daniel Ek has revealed details of his new healthtech start-up. Obsessed with the bloated and inefficient industry, Ek has spoken to The New York Times about balancing his duties as the head of the streaming giant and starting Neko Health. You can read the interview here.
5. AstraZeneca has delivered some good news in the fight against cancer. A recent breast cancer drug trial showed a “demonstrated statistically significant and clinically meaningful improvement in progression-free survival” in patients undergoing treatment. You can read more here.
And finally…
Last month, the Association of British Insurers released a report summarising the nation’s claims in 2023. While the headline stat was that £13m was paid out to homeowners and businesses every day last year, the other standout figure is that weather-related claims jumped 35 per cent to £573m.
The trio of storms Babet, Ciaran and Debi that hammered the UK last autumn have taken much of the credit for this figure. Butlin’s Minehead resort in Somerset was one of the businesses affected by the torrential weather and had to shut for four days in mid-September.
The storm played havoc on the region, including at Exeter Airport.
Now a storm is working its way through the court system. Butlin’s underwriters tried to limit the amount of cover they would provide for the damage, so the firm is suing the group of insurers, led by Aviva.
The bone of contention is the definition of a “storm”. The insurer says there is a cap of £25m on payouts as the damage fell within the category of a storm. Butlin’s, however, says the Met Office’s description of a storm includes high wind but that the £60m worth of damage they incurred was caused by flooding from rainfall not accompanied by windy conditions.
With experts warning that these variable weather conditions could become the norm, this pivotal court case could set a precedent for future business claims.
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