GAM faces a potential shareholder rebellion over executive compensation, led by proxy voting firms, two years after shareholders defeated the troubled fund house’s board in a revolt over pay.
Reports suggest that Institutional Shareholder Services (ISS) and Pensions & Investment Research Consultants (PIRC) are calling for investors of the Swiss firm to vote against the pay report to be presented at its annual general meeting early next month.
ISS was quoted by Financial News as stating in a report to shareholders that GAM’s proposal of a relative cap on bonuses for its management – other than its chief executive and chief financial officer, who have accepted an absolute cap – would ‘not guarantee the existence of an upward limitation of variable payments in [Swiss franc] or respective to aggregate base salaries.’
A GAM spokesperson told Wealth Manager: 'Shareholders approved the new compensation framework last year, which GAM overhauled based on feedback that we collected from them.'
They also noted that ISS plans to vote in favour of 'all binding compensation-related agenda items' and that another major proxy adviser – Glass Lewis – has recommended investors vote in favour of all compensation-related matters, both binding and non-binding.
Both ISS and PIRC also reportedly took aim at what they saw as vagueness and a lack of communication over the performance metrics that contribute to bonus payments for individuals other than the company’s chief executive and chief financial officer.
The GAM spokesperson said that ISS acknowledged that the firm 'has made several improvements to its compensation system and disclosure thereof, which is overall above average in the Swiss market.'
The possibility of shareholders going against GAM's board on 8 May comes after it was dealt a blow in 2017 when a majority of 54.2% voted down proposed management remuneration, also with the backing of ISS.
It also comes amid a trying time for the firm, as it seeks to steady itself following the closure of its absolute return bond fund range after an internal investigation led to the suspension and subsequent sacking of its head Timothy Haywood, who has stated his intention to appeal the decision.
Earlier this month GAM entered into an agreement to fully liquidate the remaining outstanding debt within the funds, including through a deal with Gupta family conglomerate GFG Alliance, with 89-95% of their assets having been converted to cash so far.
In February, GAM moved to restructure portfolio responsibilities across a specialist fixed income strategy, a Japan equity fund and a thematic fund focused on luxury brands following the loss of 13 named fund managers last year amid a consolidation of its fixed income and European equity teams.