Tuesday, March 29, 2022

Indivior’s UK shareholders have chance to put teeth into clawback clauses | Nils Pratley

“We recognise that our remuneration structure is different in some respects from a typical UK package,” said Daniel Phelan, the chair of Indivior’s remuneration committee, in the company’s annual report. You bet.

The difference isn’t only the size of the rewards that executives can be paid at the London-listed but US-focused drugs company spun out of Reckitt Benckiser in 2014. It is also the fact that a chief executive can be sent to prison for six months and still be regarded as a “good leaver” for bonus purposes. That probably wouldn’t happen at a “typical” UK company.

As Phelan’s committee viewed things, the critical factor in the case of Shaun Thaxter was the lack of findings of “personal wrongdoing or malfeasance” against him in a case involving false and misleading statements about the safety of Suboxone Film, an opioid addiction treatment. Instead, the former chief executive pleaded guilty to a misdemeanour under the US “responsible corporate officer doctrine”, which can hold executives accountable for the actions of others in an organisation.

Come on, though, Indivior itself paid $600m to settle investigations into mis-selling Suboxone Film. That bill alone, you would think, would cause a pay committee to cancel incentive shares for executives under clawback clauses in contracts. Instead, Thaxter was allowed to keep all outstanding awards, worth about $1.65m, and the board paid tribute to “leadership that produced years of positive operational performance” before all the trouble.

Maybe this is the American way, but there’s no reason why UK shareholders should go along with it. They vote on Thursday on the pay report. A thumbs up would send a message that clawback provisions are essentially meaningless.

Mean and green Tesco?

“Is Tesco going green by being mean?,” asks Simon Laffin, a veteran of Flybe, Mitchells & Butlers and many other boardrooms, in his blog. It’s a good question because Tesco’s boast last week that it has become “the first UK retailer to offer sustainability-linked supply chain finance” reads oddly.

Tesco’s pitch to suppliers is they can have “a preferential financing rate” via Santander if they sign up to, and meet, targets to reduce carbon emissions. The programme “will help embed sustainability goals throughout our supply chain”, said Ashwin Prasad, Tesco’s chief product officer.

Put like that, the innovation may sound warm, virtuous and ESG (environmental, social and governance) friendly. But don’t lose sight of the context. This is supply chain finance – in other words, suppliers are waiting for Tesco to pay its bills, and funding themselves by borrowing against the sums owed.

“If you are a Tesco supplier, you might think that its ethical ESG agenda might be better served simply by paying quicker, rather than making you jump through a green reporting hoop in order to pay less for the privilege of waiting to be paid,” wrote Laffin. Fair point.

For its part, Tesco says it pays small suppliers within 14 days and has improved terms during the Covid pandemic. Very good, but that rather dodges the argument about mixing two unrelated concerns. Tesco could simply set standards for suppliers on emissions if it wished. And it could reduce the need for supply chain finance by speeding up payment further.

Boohoo’s old brands home

Boohoo, when it wasn’t tackling allegations of shoddy working practices among its suppliers in Leicester, spent last year buying up the high street’s off-casts. Oasis, Warehouse, Debenhams, Dorothy Perkins, Wallis and Burton arrived as brands to be reinvented in online-only form.

That’s quite a collection of old retailing names, but their second acts do not look set for starring roles. Boohoo said it expects the bundle to add only five percentage points to overall growth in revenues this year. In hard numbers, that equates to roughly £90m, which doesn’t feel much.

Boohoo’s combined purchase price for the whole lot was also about £90m, so the mopping-up operation still represents a low-risk piece of business. But, in the context of a group with £1.7bn of sales, the main attractions will still be Boohoo, PrettyLittleThing and Nasty Gal for years to come. Yet the creation of a retirement home service for old brands could yet prove a distraction.

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