O'Toole's FirstGroup 'welcome' sparks shareholder rebellion

FirstGroup yesterday narrowly survived one of the biggest shareholder rebellions of recent years over what one top-ten institutional investor claimed was concern over a "golden hello" for chief executive Tim O'Toole.

Former London Underground boss O'Toole, who succeeded the Aberdeen transport giant's founder Sir Moir Lockhead in November, was awarded 214,826 shares in January to "retain" him as chief executive. At last night's closing share price, the stock would be worth 753,000, although US lawyer O'Toole cannot cash in the shares until November 2013.

Nearly 43 per cent of votes cast at FirstGroup's AGM in Aberdeen were against the directors' remuneration report.

The Association of British Insurers, the influential trade body, had issued an "amber" alert over O'Toole's retention awards, advising shareholders to think carefully before voting.

A spokesman for Pensions & Investment Research Consultants (Pirc), the shareholders advisory group, expressed surprise over the rebellion, having only recommended that investors abstain from voting on the directors' remuneration report rather than vote against it.

Pirc had called for specific targets under the directors' annual bonus scheme to be made public and had claimed one of the upper targets in the long-term incentive plan "is not considered sufficiently challenging".

One industry source said: "It depends on how you view the so-called 'retention' share award - some investors will have seen it as an effort to 'retain' O'Toole but others will have seen it as 'welcome' payment.

"It's not necessarily a reflection on O'Toole as an individual but maybe more of a comment on the structure of the award, which we've seen haven't worked at other companies."

The shareholder backlash came amid a series of rebellions against directors' pay. On Thursday, voters holding 10 per cent of luxury goods group Burberry's stock rejected "excessive" executive pay. In May, investors representing 20 per cent of banking giant HSBC's stock refused to back the report on directors' remuneration.

FirstGroup's investor unrest overshadowed a trading update that accompanied the AGM, with shares motoring ahead by 6.3 per cent after the UK rail division received a boost from commuters leaving their cars at home and hopping on the train instead.

The group's rail services - which include ScotRail, TransPennine Express and First Great Western - posted an 8.5 per cent rise in like-for-like passenger revenues in the three months to 30 June.

Bus services in Glasgow and Manchester saw gains from Take That's concerts in the two cities.

Analysts added that the North American FirstStudent school bus business was retaining more contracts than before.

Shares in FirstGroup closed up 20.8p at 350.6p, having touched 370.3p earlier in the session.