HBC shareholders challenge executive pay packages, company’s true estate plans

TORONTO — Hudson’s Bay Company come up against a contest from a few of its best high-profile investors Tuesday over its judgment to award executives with multi-million-dollar pay packages despite two years of weak sales and sizable losses for the retailer.

The Ontario Teachers’ Pension Plan, British Columbia Investment Management Corp. and the California Public Employees’ Retirement System (CalPERS) stated they voted from the company’s remuneration practices that include a $54.8 million pay package for the retailer’s executive chairman Richard Baker.

The “say on pay” vote — a non-binding motion that is growing in popularity at Canadian companies and aimed at collecting shareholder feedback — took place at the company’s annual general meeting in Toronto and ended in the executives’ favour.

However, CalPERS spokesperson Mike Osborn stated in an email “we don’t consider the company sufficiently linked pay with performance” and Teachers’ stated in its proxy vote statement that “in this case, we do not consider that the awards have been sufficiently justified.”

Baker’s compensation includes more than $37 million in share-based awards and more than $16.6 million in option-based awards. The company’s other executives are due to earn totals between $1.4 million and $9.4 million, according to HBC’s advice circular.

After the vote passed, one shareholder in the audience criticized Baker’s remuneration saying, “It is one thing to award a package. It is an additional to accept it and so I think accepting it reflects on (Baker)’s character, who not so long ago stated the fair financial worth was twice where these payouts are.”

The shareholder called on Baker to address the issue, to that Baker replied “we appreciate your question. Thank you.”

The majority of other stakeholders at the meeting focused on the financial worth of the company’s true estate, that at least one activist investor has previously pushed the company to think strategically about, provided the retailer’s rocky recent performance that contained a $400-million defeat in its first quarter compared with a defeat of $221 million a year ago.

In October, Jonathan Litt, who is chief investment officer and founder of activist investor Land & Buildings Investment Management, stated the company is honestly a true estate company, not a retailer, that has unsuccessful to outline a plan to unlock the “substantial true estate financial worth trapped in the company.”

On Tuesday, one shareholder echoed Litt’s sentiments saying, “what are you people waiting for? Are you waiting for us to go into a recession ahead of you sell a few of your true estate?”

He suggested the company take its Toronto HBC and Saks Fifth Avenue location at Yonge and Queen St. and build condos above it “while true estate is hot.”

Helena Foulkes, the company’s chief executive officer, indicated that the company might be ready to heed a few of their investor’s advice.

She stated the company was looking at selling certain properties, but was not in a hurry to sell anything quickly.

Baker stated the company was looking to “better utilize” its spaces to create revenue as it has over partnerships with Topshop, health clubs or shared office space company We Work.

In Toronto, for example, he stated the company had taken its Yonge and Queen St. true estate and emptied two floors, pushing merchandise to other floors “in a way where we will be defeated no sales.”

That freed up 100,000 square feet of prime space that the company used for a lease with We Work, valued at more than $50 a square foot.

He stated the deal was generating foot traffic and new shoppers and is indicative of the company’s plans moving forward.

“Our general focus around the world is to ahead utilize space, rather than selling off the particular pieces.”

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