A sizable chunk of Games Workshop’s shareholders aren’t happy with the way it pays its directors and executives. The firm best known for miniature wargame Warhammer 40k held its 2024 Annual General Meeting on Wednesday, with shareholders voting on a variety of business issues – and nearly 27% of the shareholder vote called for the company’s ‘remuneration policy’ to be scrapped.
If you’re a Warhammer 40k fan first and a financial analyst not at all, this may sound like the kind of arcane paper-pushing or mysterious politicking you’d associate with the Imperium of Man. We’ve pored over Games Workshop’s annual report (which is darn sight more complicated than a Warhammer 40k Codex) to get to the facts.
The UK Companies Act allows shareholders to vote periodically on a firm’s remuneration policy, the document that sets out how it will pay its directors and executive directors. Games Workshop’s current policy was adopted in 2021, when it was approved by just over 85% of the shareholder vote. That approval rate has now dropped to 73.24%.
Shareholders are also less enthused by the specifics of how GW’s executives have been paid this year. The ‘remuneration report’ details executive pay and bonuses for the year, and shareholders are entitled to an ‘advisory vote’ to express their views on whether or not the pay was justified. This year the report had just 79.08% approval. To put it in context, all other business in the meeting was passed with at least 90% approval.
But what, specifically, do shareholders think is the problem? That remains a mystery. GW notes in its voting results for the 2024 AGM that it “takes the outcome of shareholder votes very seriously and will engage with shareholders to understand their views”. It will “publish the outcome of this engagement in the next six months”.
We’ll put forward some possible theories to illustrate the facts at hand, but to be clear, this is pure speculation. Investors will mostly be large institutions such as banks, wealth management funds, potentially even countries, and will have a variety of different motivations.
Option one: they think someone is being underpaid.
Remuneration policies are intended to attract, retain, and motivate high performing managers to companies. Shareholders may think the current policy does not provide a big enough incentive. Financial year 2023/24 was the most profitable year ever for Games Workshop, thanks in no small part to the successful release of Warhammer 40k 10th edition. The firm is also delivering on several long-term goals, such as overhauling its IT infrastructure and building a fourth factory.
Option two: they think someone is being overpaid.
The remuneration policy entitles the firm’s executive directors to an “exceptional bonus award”, up to 150% of salary for Chief Executive Officer Kevin Rountree and outgoing Chief Financial Officer Rachel Tongue, and up to 100% for incoming CFO Liz Harrison. Two thirds of the cash from these awards must immediately be spent on GW shares. Rountree received the maximum possible bonus this financial year, bringing his total remuneration to $2,489,529 (£1,874,000).
Option three: they want a more targeted remuneration strategy
Games Workshop notes that its remuneration policy is unusual compared to other companies of a similar size, because it does not feature a Long-Term Incentive Plan. LTIPs tie executive bonuses to specific, individualised targets; in theory, these ensure pay awards go to individuals who meet the goals they’ve been set. Games Workshop states “LTIPs could have the potential to unbalance the organisation with individuals being incentivised to achieve personal goals, at the expense of the wider organisation”.
Games Workshop’s remuneration committee gives out exceptional bonus awards to executives if the company as a whole performs well on several financial measures: “growth, margin, group profit, earnings per share, cash generation and dividend payments made to shareholders”, and paying out Profit Share to employees. Executives get bonuses if the company as a whole does well, whether or not they had a hand in it.
If you’ve made it through all that, we recommend reading up on some Warhammer 40k faction lore to refresh yourself. Or pick up a Warhammer 40k book – the latest Humble Book Bundle is packed with great 40k novels for dirt cheap.
Source: Wargamer
