Vislink...Remuneration Committee meeting with shareholders

The Vislink remuneration issue relating to the totally inappropriate and over generous Value Creation Plan was flagged up by Paul in his daily blog a few weeks ago. A large group of us decided we needed to meet with the Remuneration Committee so they could hopefully explain themselves and as there are hundreds of investors interested in the outcomet I have decided the best way is to open up the correspondence I received after our meeting with the Remuneration committee. I am spending vast amounts of time on this and with every piece of information more questions seem to arise. There really are a mass of issues highlighted by shareholders surrounding this VCP.

If you want to see all the background material and links to the uproar the VCP caused then do check this shareholder action group website link www.freesharedata.com/vislink-poll

In fairness the three members of the Remcom spent over two hours with our eight strong shareholder group and the questions put to them were constant and very direct from all parties in the room. There were many issues that could not be answered fully or that the Remcom felt were commercially sensitive or could be construed as forecasts and they did not want to divulge the full detail. They did state that they used the Deloitte small-mid cap report for guidance on comparatives and Deloittes were the company who provided advice as the Remcom consultants.

Most questions related to the VCP and which other similar schemes had been used as comparative plans? We were not told on the day but they said they would come back to us ! There was an attempt to show us a presentation on a tv screen in the room but the print and graphics were so tiny it was pointless and we simply carried on with the target line of questioning. I will ask if the presentation can be made available to all shareholders for download as we did not receive a copy or know whether the content is useful.

The shareholder group were totally baffled as to why this scheme was needed at all with the LTIP still in place for another 18 months and of course why a VCP style plan is now required which is more commonly used in private equity situations rather than AIM listed companies ?

The Remcom admitted they had not personally spoken to any shareholders but the brokers N+1 Singer said in the meeting that they themselves (N+1) had checked with major shareholders equating to 40% of shares in relation to the VCP scheme and claimed that the shareholders were positive. The three NEDs were happy when they initially proposed the VCP and although now surprised by shareholders annoyance, still think that its fair. However, they aren’t prepared to hold an EGM to have a vote by ALL shareholders on the fairness of the scheme.

It appears that any amount of the company in percentage terms could have been given away under the scheme and under AIM rules we as the shareholders have not got the ability to automatically vote against it ! We definitely need this tightened up and institutions need to look at this with us.... frankly there should be limits if these VCPs are to become commonplace

The issue of why Mr Hawkins waived his £304,000 bonus last year in favour of the company paying a much larger HMRC liability on his behalf was a subject that the Remcom were quite sensitive about and said they were still investigating it as you will see has been confirmed in the official reply letter below. As shareholders we are not comfortable with contra payments being made in this way and cannot see how the payments actually balance. We are also worried that HMRC may see this as an additional benefit being paid on behalf of an employee and require further tax !

A tax expert may be able to independently comment on this ? (note, for 2014 assuming John Hawkins had full payout of his £304k bonus he would have received ~ £740k. However the real benefit was twice that as his historic tax liability was paid in full instead. Added to that his 1 million nil cost options for the year gives him a total payout of ~ £1.6m. That is a massive annual reward considering Vislinks pbt was £5.4m. So he’s already taking almost 30% of the profits before we start looking at new schemes to deliver additional rewards …)

Anyway there were clearly answers needed that could not be given at the meeting and the chairman of the Remcom agreed to come back to us within the week on all points so here is his reply....


Dear David,
Following our recent meeting and the points raised regarding our remuneration policies, I would like in this letter to outline a number of measures we intend to take, along with answers to questions that arose during the meeting which we may not have been able to answer immediately.
Dealing with the questions.

i) Are we willing to disclose the LTIP targets?

Our policy is to do so only through our Annual Report, as to reveal them would, we believe, provide inside information about our financial objectives and forecasts. As you will appreciate, we do not wish to selectively disclose our forecasts nor disclose them to the market. As with previous schemes we have used EPS growth as the key metric as we feel this underpins the shareholder value targets in the VCP scheme.
As we mentioned at our meeting, all senior staff in the group have LTIP opportunities aligned to those of the executive management.

ii) The definition of EPS shown in the presentation was different to that set up in the annual report. Which is the correct one?

Both definitions are correct. The definition in the annual report shows adjusted EPS while the definition in the VCP presentation shows adjusted EPS normalised for tax.

iii) Would we consider disclosing the names of the companies which formed the due diligence while developing the VCP scheme?

The remuneration committee examined closely a number of public company VCPs when deciding on upon the parameters of the Vislink VCP. Those companies examined represented a wide cross-section of UK public companies which, we believe, had transformational objectives and - which to a large extent - have been or are being realised.
As part of our analysis we sought to focus on the performance conditions and length of the schemes which, we believe, best reflect Vislink's circumstances. A bespoke scheme was created accordingly with the assistance of our professional advisers.

iv) What was the cost of putting the VCP in place?

We do not provide details of expenses incurred during the year, outside of our normal results announcements. The overall cost was, however, substantially below the lowest value mentioned during our discussions.

v) Why, when an indemnity existed over John Hawkins' tax obligations for payments made through his service company, why did Vislink contribute to the HMRC costs?

As mentioned in the meeting, the Company continues to examine this matter.

vi) Would we consider forming a remuneration panel upon which representatives of our small, medium and large shareholders would sit?

The formulation of executive remuneration schemes inevitably requires discussion about long term financial targets and strategic goals and, as you can appreciate, this can only be conducted by insiders. The remuneration committee endeavours to consult with the company’s major shareholders on material matters through the appropriate channels and at the appropriate time. The remuneration committee appreciates the willingness of all shareholders to consider matters of remuneration and will bear this proposal in mind going forward.
This question has however led the remuneration committee to consider ways of increasing the company’s communication and engagement with the company’s smaller investors.
We therefore propose that the same shareholder group attending last week’s meeting are invited to attend our annual Capital Markets Day, normally held in London in April/May, at which our group management team demonstrates the Company’s products and systems and informal discussions take place on strategic issues.
As previously explained, we have already begun to increase the group’s contact with smaller shareholders through our engagement with Equity Development, the UK's leading independent investment research company. In addition the group provides what it believes to be a comprehensive annual report detailing its remuneration policy and the company will continue to hold an open annual general meeting in London, which we encourage shareholders to attend.


vii) To what extent is the valuation of the VCP scheme influenced by LTIP shares?

The VCP scheme is not adjusted for LTIP shares. The VCP is a stand-alone incentive scheme which runs until June 2018 and continues for a number of years after the LTIP has finished.


viii) Could the contact details of the Chairman of Remuneration be posted on the company website?

The Company’s contact details are readily available on the company’s website and at the bottom of most of its RNS announcements. Any correspondence addressed to the Remuneration Committee will be sent on to the committee members and addressed where appropriate. In addition we will add a new link to our web site to enable shareholders to reach the chairman of remuneration. http://investors.vislink.com/investors/investor-contacts

I hope this note has answered most of the outstanding points from our meeting.
As we explained, we believe that we have recruited a management team with experience in transforming complex businesses whilst growing shareholder value, and we have developed an integrated scheme of annual performance bonuses, three year EPS based LTIP plans and an effective four year value creation plan, which we believe will reward and incentivise the executive management team to maximise the group’s medium to long term performance and to help ensure the retention of the group’s senior management team through the group’s transformational period.
As noted in the announcement of the VCP, the incentive policy is directly linked to delivering significant shareholder value over the long term.

With best wishes
Robin Howe
Chairman of the Remuneration Committee
Vislink plc.


So there we are....The Remcom think the VCP is totally acceptable and we should all now sit back and accept it. What do you think ? Do we need a campaign that involves the larger shareholders...Do we go it alone ?

David