One in five Westfield Corporation shareholders voted against the retail property giant’s remuneration report following concerns about how the company rewards its executives.
At the $19 billion company’s annual general meeting in Sydney on Friday human resources committee chairman Mark Johnson AO acknowledged “the level of votes against the report were higher than previous years”. However, he tried to reassure shareholders that the company’s remuneration policies were designed to “enhance securityholder value”.
“Why individual investors choose to vote against a remuneration report is not always clear,” he said.
“It is particularly the case this year because senior executive remuneration remained unchanged when compared with previous years.”
He also confirmed Westfield’s largest shareholder, the Lowy family, was unable to vote on remuneration and the company intends to keep the dual chief executive structure.
Shareholders questioned the company’s adoption of funds from operations – a measure of a company’s cashflows – as one of the long-term incentive hurdles, instead of total shareholder returns which include both dividends paid and capital growth.
“The way it is written in the annual report, the hurdle for the FFO is reset very year, it is not a long-term hurdle and in fact this year, it declined by 12 per cent, and still resulted in a 100 per cent award of the hurdle,” one shareholder said at the meeting.
Consistent target
“It is really a short-term incentive with a four-year retention period … and if you want to adopt FFO, in lieu of TSR, why can’t it be adopted over four years instead of every year?”
But Mr Johnson clarified the use of FFO as a measure of performance was a more consistent target in line with other targets used internally and while an annual target was used, executives would still be tied to long-term performance because reward shares do not vest for four to five years.
“While we don’t believe in a TSR guide … when the executive gets [those shares], they will be at market value,” Mr Johnson said. “Obviously a better market is better.”
Amid strong results, Westfield also said it was going to reposition its assets in the US and UK markets as the retail business continues to weaken against online shopping, by expanding into apartment development. Westfield will build 8000 apartments in the US and the UK on land in their portfolio.
“We plan to partner with third-party capital to fund the construction of many of these opportunities,” co-chief executive Peter Lowy said.
“In 2018, we expect to commence a 1200-apartment project at Stratford in London and a 300-apartment project at UTC in San Diego.”
Shareholders also overwhelmingly approved the appointment of two new US directors, former Under Secretary of the Treasury for Domestic Finance Jeffrey Goldstein and president of Conde Nast Entertainment Dawn Ostroff.
