12 ★ FINANCIAL TIMES Wednesday4 March 2020

least two years after they have left the

company, a move aimed at ensuring

executives focus on the long-term suc-

cessofthebusiness.

This has proven unpalatable to some

executives.

Legal & General Investment Manage-

ment, the UK’s largest asset manager,

said it planned to vote against any com-

pany where executives were not re-

quiredtoholda“significantproportion”

of shares — valued at 80 per cent of sal-

ary—fortwoyearsafter eparture.d

Controversial incentives

Lloyds nda BT reamongthecompaniesa

considering overhauling their long-

term incentive plan — a type of target-

related bonus that has proved contro-

versialinrecentyears.

Lloyds has suggested replacing its

LTIPwithanalternativeplanthatwould

cut the maximum payout for its chief

executive from 400 per cent of salary to

200 per cent — but give more certainty

overthesizeoftheaward.

A small number of other companies

are proposing similar so-called

restrictedshareplans.

But these are contentious, with many

chief executives unwilling to give up

the potential of big payouts, while

shareholders are concerned that

bosses will receive awards

regardlessofperformance.

could be among the most controversial

as it looks to increase potential payouts

for top executives even as it battles a

plunging share price and tries to raise

morethan£1bninemergencycash.

Jessica Norton, at consultancy WTW,

said pay rises were happening only

where executives were underpaid com-

paredwithpeers.

Butsomeinvestorsarenotimpressed.

“We thought the pay genie had been put

in the bottle, but this round of pay con-

sultations we have found that is not the

case,”saidMrStirling.

Pensions

After forcing banks such as Standard

Chartered and Lloyds tocut executive

pensions ast year, investors are turningl

to non-financial companies, where sen-

ior staff often receive far larger pension

paymentsthanthewiderworkforce.

AstraZeneca, minerAnglo American,

Rolls-Royce, Tarmac-makerCRH nda

Holiday Inn ownerIHG, all offer high

pensioncontributionstoexecutives.

Mr Gosling said pensions alignment

— where contributions for executives

are at a similar level to more junior staff

—wasthe“hottestissue”in2020.

Post-employment holdings

IA guidelines announced

last year said directors

should hold shares for at

Lloyds Banking Group nda Intu, the

shopping centre owner, when annual

meetingsgetunderwayinApril.

“This pay issue is becoming much tes-

tier than it has been for some time,

partly because executives feel like they

are getting it from all angles,” said Tom

Gosling,headofPwC’sUKrewardsprac-

tice.

Last year, 62 UKcompanies suffered

revolts over pay, according to data from

the Investment Association, the UK

trade body that represents big investors

with £7.7tn in assets. Due to the sheer

number of pay policies that will go to a

vote this year, investors said they would

notbesurprisedifrevoltsdoubled.

“Some companies are clearly just

pushing on [with controversial pay poli-

cies] and we’ll meet them again at the

AGM,” said Euan Stirling, global head of

stewardshipatStandardLifeAberdeen.

These are four of the big issues share-

holdersareprimedtodiscuss.

Pay rises

After years ofinvestor pressureover

egregious rewards, some companies are

preparingforatougherfightthistime.

Mirza Baig, global head of governance

at Aviva Investors, said there was “a

trend of increasing total packages” in

some of the pay policies proposed so far,

acrossbasesalariesorbonuspots.

British shopping centre owner Intu

AT T R AC TA M O O N E Y— LO N D O N

Bill Winters,Standard Chartered hiefc
executive,last year found out the hard
way what can happen when you pick a
fightwithshareholders.
Aftercloseto40percentofthebank’s
investors refused to back its pay policy
— because of a squabble about pensions
— a spat broke outin which Mr Winters
called them “immature” and they
replied that he was tin-eared. Before the
year was out,Mr Winters’ pension
allowancewascutinhalf.
Shareholders are gearing up to take
on more chief executives over pensions
and pay in what is expected to be a
fraughtUKannualmeetingsseason.
Over the next few months, hundreds
of listed companies in the UK will pro-
posenewpaypoliciesthatsetoutexecu-
tive remuneration for the next three
years — and put them to binding inves-
tor votes. The triennial process fre-
quently results in clashes between
shareholdersandexecutives.
Top investors are predicting potential
clashes at companies includingAstra-
Zeneca, the pharmaceuticals group,

COMPANIES

F

our years ago, when na earthquake in

Kumamoto rippledc Sony’s plant for image sen-

sors in southern Japan, the company immedi-

ately sought the advice of chipmakerRenesas

Electronics orestoreitsoperations.t

Sony and other companies have benefited from lessons

after the Tohoku earthquake and tsunami in 2011, when

car factories worldwideground to ahalt after Renesas

haltedproductionofmicrocontrollersusedinvehicles.

After the coronavirus outbreak in China, thoseexperi-

ences of sudden disruption have proved vital in helping

Japanese companies adapt.Toyotaand othercarmakers

have mostly been able to determine which partswill start

runninglow,andwhen,withsupplychainshavingbecome

moretransparentoverthepastdecade.

While it may take time, Satoshi Nagashima, Tokyo-

basedpartner at consultancy Roland Berger,says most car

parts made in China can be sourced elsewherein view of

the diversification of production sites and carefully pre-

paredback-uplistsforalternativesuppliers.

But even withcontinuity plans that have improved each

time acatastrophehas struck, a global epidemicplaces

Japanesecompaniesinunchartedterritory.

Onedifference between a natural disaster and a disease

outbreak is the uncertainty of when the tide will turn. In

the case of an earthquake, the immediate aftermath is

when the damage is greatest, so companies can calculate

from there how much inventory is needed and at what

pacetheyshouldrestoreproduction.

With Covid-19, most companieshope that the outbreak

will be contained by the end of March, but with the epi-

demicspreadingoutsideChina,thepeakishardtocall.

If it can be brought under control within the first quar-

ter, it makessense for companies to wait until production

resumes in China instead of shifting it elsewhere, which

would entailextra cost. But the lack of clarity creates a

dilemma.

While it has become easier to trace where companies

procure their components, supply chains remain complex

in thelargest car market and

executives say identifying

potential shortages of mate-

rials from lower-tier suppli-

ersinChinaisdifficult.

Although in 2011 Japanese

companiesexperiencedboth

a devastating earthquake at

home and heavy floods in

Thailand within months,

they are far less used to dealing with an epidemic that has

suchareach.

In addition toVolkswagen’s plants in China, the out-

break has sparked a temporary shutdown ofNissan’s

plants in Japan,Samsung Electronics’ smartphone factory

in Korea and carpartsmakerMTA’s electric parts factory

inItaly.

The coronavirus crisis ishitting close to home, with

more than 240 cases confirmed in Japan. The government

hastakenmeasuressuchastheclosureofallschools,while

companies includingPanasonic, Sony andShiseido aveh

recommended that their Tokyo staff work from home.

Manufacturing sites have so far been largely unaffected,

but that could quickly change if a single factory worker is

infected.

Yet responses to the epidemic have revealedgaps in lev-

els of preparedness, with many smaller companies not

havingsystemsinplacetoallowremoteworking.

Only one in five small and medium-sized enterprises

said they were planning to, or have taken, coronavirus

measures such as expanding procurement options,

according to a recent survey byTokyo Shoko Research,

comparedwith40percentofbigcompanies.

Theoutbreakspells changes to long-established work-

ing culture and norms.Options such as flexible working

hours, teleworking, and more online news conferences

exist.But technology alone will not be enough to ensure

that employees can work from home, especiallyif schools

areclosed.

Nannies are rare and expensive. It may make more

financial sense to take time offrather than pay $150 to

$200 to hire a babysitter for a day. Grandparents often do

not live nearby to help out, and culturally embedded gen-

der roles mean the burden often falls on mothers to juggle

workingathomewithlookingaftertheirchildren.

The role of employers should not end with simply

embracing remote working. They need to make sure it is a

practicaloptionwhencircumstancesrequireit.

Japanese companies have long shown flexibility and

resilience when confronted with a natural disaster. Those

qualities will be crucial in the face of what is shaping up to

beaglobalpandemic.

[email protected]

INSIDE BUSINESS

ASIA

Kana

Inagaki

Japan Inc knows how

to adapt but Covid-

is an unmapped zone

One difference

between natural

disaster and

disease outbreak

is uncertainty

C H R I ST I A N S H E P H E R D— B E I J I N G

Geely s aiming to bei he first Chinat
carmaker to design and build satellites
to support its autonomous driving
programme, the latest step by
founderLi Shufu n his bid to build ai n
industryleader.

Geely, which owns Swedish brandVolvo
Cars, Malaysia’sProton, and a stake in
Mercedes-Benz wnero Daimler, will
invest Rmb2.27bn ($325m) in a new
development centre and factory to
manufacture satellites this year, the
companysaidyesterday.
The announcement makes Geely the
first known Chinesecarmaker with

plans to build its own satellites. r Li’sM

move sparked comparisons in China

media withElon Musk, founder of elec-

tric carmakerTeslaand private space

explorationcompanySpaceX.

Last month eely drew comparisonsG

withVolkswagen hen Mr Li’s holdingw

group announced plans to merge Geely

Automobile and Volvo Cars, moving the

company towards becoming the first

globalChinesecarmaker.

Che Jun, Communist party boss of

China’s eastern Zhejiang province,

where Geely is based, said that the com-

plex would be built in Taizhou city and

thatconstructionhadbegun.

Thecentrewilldesign,testandmanu-

facture low-orbit communication satel-

lites, urpose-built to improve geoloca-p

tionofvehiclesandtosupporttheircon-

nectedfunctions,Geelysaid.

Geely hasbeen pouring money into

new technologies from self-driving

cars toflying taxis, spending Rmb20bn

on research and development in the

pastyear.

The nvestmentsi are part of the

group’sspend on global expansion,such

asbuyinga$9bnstakeinDaimler.

The announcement comes as the

coronavirus outbreak in China has

deepened a downturn in its car market,

setting itup for a third consecutive year

ofdecliningsales.

Automobiles

Geely to build satellites for self-driving cars

R O B I N W I G G L E S WO RT H

Fidelity ode last year’s market rally tor

reach record revenues, profits and

assets under management in 2019,

fending off many hallenges unsettlingc

theglobalinvestmentindustry.

In addition to rising markets, the Bos-

ton-based investment company was

boosted by inflows into its money mar-

ket and index funds, which more than

offset accelerating outflows from the

active stockpicking funds that made

Fidelity’sname.

Overall Fidelity’s assets under man-

agement climbed 26 per cent during

2019 to reach a record $3.2tn, according

to its annual report releasedyesterday.

That helped lift Fidelity’s revenues to

$20.9bn and operating income — the

only profit metric the private company

discloses publicly — to a record $6.9bn.

Thisisgreaterthanthe$5.6bnoperating

income recorded last year by rival

BlackRock, the world’s largest asset

manager.

“Each of our major lines of business

had another strong year,”Abigail John-

son, Fidelity’s chairman and chief exec-

utive,saidinherannualletter.

Fidelity remains one of the finance

industry’s biggest profit machines,

partlythankstoabroaderbusinessthan

manyofitsrivals.

Asset management remains the big-

gest part of the overall group, but Fidel-

ity also services tens of millions of

Americans through brokerage

accounts, pension plans and other sav-

ings products. In total its assets under

administrationrosebyaquarterin

to$8.3tn.

In the past decade, however, its 1990s

dominance has been curtailed by the

emergence of passive giants BlackRock

andVanguard which dominate the—

index fund industry. Low-costpassive

funds hat track an index have amassedt

assets at the expense of traditional

investing strategies that Fidelity helped

bringtoprominence.

Financials

Fidelity hails year of record sales and profits

DAV E L E E— S A N F R A N C I S C O

Amazon struggling to contain ram-is
pant price-gouging by sellers capitalis-
ing on the fear surrounding the spread
ofthecoronavirus.
Hand sanitiser and respiratory masks
are in some cases being sold on the site
at a more than 2,000 per cent mark-up,
compared to normal retail prices,
despite Amazon saying it had removed
“tens of thousands” of listings and was
monitoringpostingsclosely.
Among the many examples, pack ofa
20 masks made by manufacturer3M,
but sold by an unauthorised reseller,

was on sale at $387, compared to a nor-

malretailpriceofaround$14.99.Apack

of242ozbottlesofPurellhandsanitiser,

typically sold for less than $10 a box,

waslistedat$400.

“There is no place for price-gouging

onAmazon,”thecompanysaid.“Weare

disappointed that bad actors are

attempting to artificially raise prices on

basic need products during a global

health crisis and, in line with our long-

standing policy, have recently blocked

orremovedtensofthousandsofoffers.”

It added: “We continue to actively

monitor our store and remove offers

thatviolateourpolicies.”

A further 1m listings have so far been

removed by Amazon for misleading

product descriptions related to corona-

virus, a spokesman added. The listings

in question were posted by third-party

sellers on Amazon’s platform, which

make up about half of all sales on the

site. These sellers list items directly on

Amazon’s marketplace and in some

cases use Amazon’s fulfilment infra-

structuretogetproductstocustomers.

Reputable sellers of the goods did

appear within Amazon’s listings, but

most displayed messages saying prod-

uctswereoutofstockor“unavailable”.

“We have added shifts and have team

members working overtime,” said a

spokeswoman for Gojo Industries,

which distributes Purell, a leading hand

sanitiserbrandintheUS.“Gojodoesnot

set retail prices to consumers, but we

feel strongly that there is no place for

price-gouging, especially during times

ofelevatedpublichealthconcern.”

With thenumber of confirmed cases

in the US risingthe impact of coronavi-

rus is starting to be felt in several areas

of theAmazon empire. On Monday,it

displayedamessageforits“PrimeNow”

fast delivery customers warning of

delays in some markets, understood to

beduetoexcessivedemand.

In an effort to lessen employees’

potential exposure to the virus, the

companylastweekinstructeditsstaffto

avoid any non-essential travel in the US

and internationally. Its programme

inviting customers to take a tour of its

distribution centres has been “paused”

in North America. Two Amazon

employees in Milan, Italy, have con-

tractedthediseaseandwerebeingquar-

antined,theNewYorkTimesreported.

Despite the disruption, Amazon has

not followed tech rivalsMicrosoft nda

Apple n issuing a profit warning for thei

currentquarter.

Technology

Virus sparks price-gouging on Amazon

Platform struggles to halt

resellers exploiting health

fear with huge price hikes

Remuneration. xecutive rewardsE

Investors take on UK businesses over pay

High pension awards and

bonus increases set scene for

fraught meetings season

Bill Winters,

Standard

Chartered chief,

pictured below,

saw his pension

allowance cut in

half after a

squabble with

investors

Switching Chanel ew collection on show in ParisN

Models parade designer Virginie Viard’s ready-to-wear collection for Chanelduring Paris Fashion Week yesterday— Gonzalo Fuentes/Reuters

$

Price of a pack of

20 face masks

offered by reseller

instead of usual

$14.

$

Charge for 24-pack

of hand sanitiser

bottles, up from

normal $10 a box

MARCH 4 2020 Section:Companies Time: 3/3/2020- 18:11 User:timothy.digby Page Name:CONEWS1, Part,Page,Edition:USA, 12, 1