Executive Pay: Trinity Mirror and the pay disconnect

13th March 2012

Let us consider the case of Trinity Mirror. We are by now all familiar with the structural decline of print media and the challenge all traditional newspaper groups are facing from the iPad, digital, ‘news on the move’ generation. Trinity is no exception – revenues have been in gentle decline over the period 2006-2010, although the company has been modestly successful at preserving margins and operating profit (an internal metric has allowed substantial cash bonuses to be paid throughout, which has done little to enrich shareholders).  The bigger picture is more sobering however with the company’s market cap falling to a little over £100m, tumbling from a FTSE100 position to that of a small cap. The dividend, suspended in 2010, reflects a share price that has fallen steadily from a heady 800p in 2000 to 41p today.

The erosion of value has been stark; the share price has fallen by 92% over five years, compared to -5.5% for the FTSE100, whilst EPS growth over the same period has been in negative territory.  The only benchmark not retreating is the chief executive’s remuneration package.

Sly Bailey, the long serving chief of Trinity Mirror, continues to be paid as though the Remuneration Committee is in complete denial of the underlying structural malaise. In 2011 she enjoyed a package amounting to £1.4m comprising basic salary and short-term bonus, with a further 80% of salary awarded in share incentives (£600,000 at face value). The package was unchanged from 2010 when the company declined in size from 306 to 470. The package awarded by the Remuneration Committee reflects the heady days when Trinity Mirror enjoyed the status of a FTSE100 company; back in 2005 when Trinity Mirror was ranked 112, and enjoyed revenues of over £1bn Bailey received aggregate awards of 170% of salary, on a basic £550,000 per annum. As decline set in remuneration continued to rise, with basic salary increasing every year between 2006 and 2010, and then only flat-lining when the company went into nose-dive. By our estimation her basic salary is now at least £400,000 adrift of where it should be based solely on present market cap size.

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