Fortescue shareholders reject executive pay proposal

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Shareholders have rejected the pay and bonus policy at Fortescue, the Australian iron ore-to-green hydrogen company, following an executive exodus this year over the group’s direction.

Investors balked at special one-off payments to former Fortescue executives, with 52.4 per cent of shareholders voting against its remuneration proposal at the company’s annual meeting in Perth on Tuesday.

While the vote is not binding, it does represent a setback for the mining and energy company. A second vote of more than 25 per cent against its pay policy at next year’s annual meeting could trigger a shareholder vote to dissolve the board.

Fortescue’s so-called first strike is the second significant vote against a major Australian company’s pay proposal in recent weeks after 83 per cent of investors in Qantas rejected the airline’s pay policy.

Penny Bingham-Hall, the Fortescue board member who chairs the remuneration committee, said shareholders had expressed “strong feelings” about the plan to give one off bonus payments to some long-term executives, including former metals boss Elizabeth Gaines, after they left the company. 

Proxy advisers had recommended voting against the pay policy which was put to the vote against a backdrop of sudden executive departures at the company leading to scrutiny of its “boiler room” culture. 

The company’s share price has nonetheless grown significantly in the run-up to the annual meeting. Chinese iron ore futures are up more than 17 per cent this year to Rmb978 ($138) a tonne on hopes for greater infrastructure spending in China.

The protest vote over pay overshadowed a celebratory tone at the meeting where billionaire Andrew Forrest, the company’s founder, talked about the beginnings of a business he founded 20 years ago when few believed it could compete with local iron ore players BHP and Rio Tinto. 

Fortescue, now valued at A$77.9bn ($51bn), in August reduced its payout to A$1.75 ($1.12) a share, a 15 per cent year-on-year decrease, after net profit dropped 23 per cent to $4.8bn in the year to June. Revenue fell 3 per cent to $16.9bn over the period.

Shareholders backed a change in the company’s name from Fortescue Metals Group to Fortescue Ltd on Tuesday to reflect the company’s increasing focus on green energy as Forrest called on shareholders to once again back his green hydrogen vision.

This week, the company signed off on three key green investment projects at a cost of A$1.1bn. Two hydrogen projects were approved — one in Phoenix in the US and one in Gladstone in Australia’s north, with the goal of producing 19,000 tonnes of hydrogen a year. It also approved a green steel project in Western Australia.

Forrest reiterated a stark warning about rising temperatures and its impact on humanity and the planet, warning that parts of Australia are set to become uninhabitable due to extreme heat. 

He hit out at the oil and gas sector who he described as “the great deceivers” over global warming. “The oil and gas sector simply do not care enough about your future,” he said. ExxonMobil and Australia’s Woodside were singled out for criticism by the billionaire.

Additional reporting by Hudson Lockett in Hong Kong