Financial Times Europe - 04.03.2020

(John Hannent) #1

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

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