Large shareholders in publishing group Pearson are pressing for the departure of chair Sidney Taurel because of discontent over the pay package offered to the company’s new chief executive.
A third of shareholders last month voted against the deal offered to former Disney director Andy Bird, who will replace Pearson’s long-serving chief executive John Fallon next week.
Mr Bird will receive a $1.25m base salary. Unusually for the UK market, his pay package also includes a “co-investment” opportunity: Mr Bird will buy $3.75m of Pearson shares when he becomes chief executive and, in return, will qualify for an award of up to $9.375m, paid in three separate tranches.
The targets he must reach to qualify for this award include making an “appropriate level of continued progress” in Pearson’s strategy and securing shareholder returns that are positive or in line with median FTSE performance.
Three top 20 shareholders, including some who voted for Mr Bird, told the Financial Times that Mr Taurel’s handling of the succession process was unfinished business and that his position was in danger.
Some big shareholders want Mr Taurel, the former chief executive of US drugmaker Eli Lilly who has been chair since 2016, to set a departure date before Pearson’s annual general meeting next year, to avoid a messy reappointment battle. One said it was “definitely the case” that a significant group of investors “want [Taurel] to go”.
“This is not finished,” said another top 20 shareholder. “I can’t say I’m happy with the chair’s handling [of the recent pay issues]. At some point, there have to be some board changes.”
The first top 20 shareholder said investors felt they had to support the pay offer because “a no vote would probably have meant another six months with a lame-duck CEO”.
“Most people who voted for it were probably not happy,” the shareholder said.
He noted shareholders were also unhappy with Pearson’s “dreadful returns” under Mr Taurel’s watch, and his resistance to calls to replace Mr Fallon earlier despite a series of profit warnings.
“There are shareholders who think the governance of the company has been disappointing and the chair bears ultimate responsibility,” he said.
A third big shareholder said the succession question was one that investors would “probe further”, adding, “having two Americans in charge doesn’t sit well with UK investors”.
Any vote over Mr Taurel’s reappointment is likely to be determined by Pearson’s five biggest shareholders — Lindsell Train, Schroders, Silchester International Investors, Columbia Threadneedle and Cevian Capital — which together own more than 40 per cent of the company, according to S&P Global Market Intelligence.
Pearson declined to comment.