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Shareholder groups oppose JB Hi-Fi’s remuneration report

Richard Murray
CEO of JB Hi-Fi Group Richard Murray.

Major shareholder groups have recommended investors vote down electronics retailer JB Hi-Fi’s remuneration report at next weeks annual general meeting, based on proposed increases to executive pay packets. 

According to SMH, the Australian Shareholders’ Association as well as proxy firm ISS Governance Services have both told shareholders they recommend a vote against the retailer’s remuneration report.

The ASA took issue with the lack of conditions attached to the shares issued under JB Hi-FI’s incentive program, requesting more long-term financial measures..

The ISS’ issue stems from the incentive program’s “inferior” disclosure of strategic outcomes, and the fact that dividends are payable on the unvested shares rewarded through the company’s incentive plan.

The electronics retailer said it has engaged with a number of proxy groups already.

“JB Hi-Fi engages with all proxy groups, ACSI and ASA and directly with all shareholders in regard to the AGM,” the company said in a statement to Inside Retail

“While we have met with Ownership Matters, Glass Lewis, ACSI, ASA and directly with a number of shareholders, ISS declined a meeting.”

According to the retailer, Ownership Matters, Glass Lewis and ACSI are recommending shareholders vote in favour of the remuneration report.

Last year’s AGM almost ended in the delivery of a first strike against the business’ remuneration report, with 21 per cent of shareholders voting against its adoption.

Over the course of FY19, JB Hi-Fi made a number of changes to its executive incentive program, and increased chief executive Richard Murray’s fixed pay by 3.9 per cent, and other executives by up to 8.4 per cent. 

The group also implemented a minimum shareholding requirement for executives, though also explains the difficulty in tethering executive rewards with share growth targets due to the volatility in the market. 

“The success of meeting [long-term incentives] targets (or not) in past years was often linked to macro-economic factors or share price volatility, as much as the quality of company or executive performance,” the company said. 

“The new [variable reward plan] allows for flexibility in setting performance targets to take into account changing trading conditions, providing a more motivating remuneration framework for group executives and greater alignment with shareholders.”

The changes also led to only 25 per cent of executive incentives paid in cash, with the remainder in restricted shares. 

The ASA and ISS havce been contacted for comment.

JB Hi-Fi’s annual general meeting will be held on Thursday, 24 October.

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