Pearson suffers shareholder revolt over executive pay

Pearson has suffered a shareholder revolt over executive pay as investors in the London-listed education group expressed their unhappiness over the prospect of larger payouts in the future.

More than 46 per cent of votes cast in a binding vote at the company’s annual general meeting on Friday were against a new remuneration policy, the latest in a string of protests after chief executive Andy Bird took home $8.5mn last year.

The revolt comes despite praise for Bird who is credited with helping turn Pearson around. It also highlights a conundrum on executive recruitment for UK-listed companies, as some relocate stateside.

The new remuneration policy, which sets out Pearson’s pay framework for three years, recommended increasing the maximum annual bonus level from 200 to 300 per cent of salary. It also proposed raising the maximum level for long-term incentives from 350 per cent to 450 per cent.

In its annual report the company said it represented “a UK market-aligned remuneration framework . . . but with increased opportunity levels” to address the challenges of recruiting US executives.

Pearson on Friday said its board was committed to a pay structure that allowed it to be “competitive in the global talent market” while aligning pay and performance.

Investment advisers Glass Lewis and ISS opposed the policy. Glass Lewis said benchmarking Bird’s pay against US companies “has resulted in total pay opportunity for the chief executive which significantly exceeds that of UK-listed companies of a similar size”.

Susannah Streeter, analyst at Hargreaves Lansdown, said there had been “growing unhappiness” over executive pay at Pearson, particularly given the cost of living crisis and the “vast disparity” between Bird’s pay and that of ordinary staff.

Salaries for Pearson employees in the 25th and 75th percentiles of the company were £31,998 and £58,525 respectively, the company’s annual report showed.

Bird’s total pay was $8.5mn last year, including $6.6mn that was performance-linked. However, investor displeasure at this fell short of a full protest at the AGM with only 13 per cent of votes cast against the remuneration report, referring to existing pay, compared to 37 per cent against in 2021.

Although the majority of Pearson’s revenues are in North America the group remains listed in London. The company has not ruled out a move but said in March it had “no plans” to relocate.

One Pearson top 10 shareholder said it was “moving in the right direction” under Bird and highlighted challenges with recruitment in the UK. “We have this debate on the demise of the London stock market, yet, we have a warped idea on pay,” they said. “It’s a tightrope, getting talent in.”

Since being appointed in 2020, Bird has rebranded textbook publisher Pearson as a life-long provider of education and training services, and the group was among the FTSE’s best-performing stocks last year.

A trading update on Friday showed underlying sales growth in the company was up 6 per cent in the first quarter, ahead of expectations.