Andrew Forrest defends Fortescue pay packets after proxy adviser criticism – by Tess Ingram (Australian Financial Review – November 9, 2016)

Fortescue Metals Group chairman Andrew Forrest says he will defend the company’s approach to executive remuneration “all day and every day” after proxy advisers raised concerns about the size and validity of incentives paid to senior management.

While the iron ore miner avoided a first “strike” at its annual general meeting in Perth on Wednesday, with 89.5 per cent of votes cast in favour of the company’s remuneration report, two influential proxy advisers, ISS and Ownership Matters, said there were issues with incentives paid to senior management.

Research issued by Ownership Matters said shareholders should vote against the report, arguing the company’s fiscal 2014 long-term incentive (LTI) should not have vested because the relevant target was not met.

Fortescue uses absolute return on equity as the performance measure when awarding its long-term incentives to management, with a minimum average 20 per cent return on equity over three years required in order for 25 per cent of the share rights to vest.

“Vesting occurred under the FY14 LTI at the end of FY16 only because the board elected to round up the actual average return on equity achieved over the period,” Ownership Matters said. “Actual average return on equity was 19.7 per cent, below the 20 per cent threshold required for vesting. This decision to permit vesting despite the target not having been achieved cost shareholders more than $4 million in cash.”

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