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As company accounts come under closer scrutiny amid talk of recession, shareholders continue to take the opportunity at company AGMs to express disapproval with executive pay.

Scapa Group saw significant opposition to its remuneration report and its request to disapply pre-emption rights at its on 7 August 2020.

On 12 February, the AIM 50 company posted a trading update ahead of its financial year end on 31 March 2020, reporting that revenue had decreased from £311.8m in 2019 to around £306m and that the loss of a significant contract with ConvaTec had resulted in a significant decrease in trading profit to approximately £28m. Once the news hit the market, Scapa’s share price dropped from 272 pence per share to 188 pence, its lowest in almost five years.

The impact of the COVID-19 pandemic had a further effect on the share price of the adhesive and wound-care specialist, which dipped down as low as 83.2 pence in July. In May, the company cancelled its dividend and carried out a cashbox placing for 19.99% of the company’s share capital to strengthen the group’s balance sheet and provide flexibility to support future growth initiatives post-COVID-19. The move followed guidance from the Pre-Emption Group released in April, recommending that during the COVID-19 crisis, investors consider supporting non pre-emptive fundraisings of up to 20% of a company’s issued share capital on a temporary basis.

Notwithstanding its financial difficulties, Scapa announced in its that it had failed to comply with a number of provisions of the UK Corporate Governance Code in relation to remuneration, stating that ‘due to the changes in the Remuneration Committee Chairman during the year, a review of workforce remuneration and related policies to ensure alignment of incentives and rewards with the Company culture was not undertaken.’

A combination of poor results, a cancelled dividend and a cash call do not appear to have sat well with a failure to address the increasingly controversial matter of remuneration. Although Scapa posted in advance of its AGM that results for the first quarter of the current financial year had exceeded its COVID-19 scenario plan, 23.86% of shareholders voted against the company’s remuneration report and 21.4% voted against disapplying pre-emption rights in relation to acquisitions and special investments.

In its response to the voting results, Scapa stated ‘the Board notes that Resolutions 2 and 13 were passed with more than 20% of votes cast against them. In advance of the AGM, the Board developed a clear understanding of the concerns raised by shareholders on each of these resolutions. [The Board] will continue to consult and engage with shareholders in order to foster further understanding of their expectations and views. The outcome of these engagements will be detailed in next year's Annual Report and Accounts.’