SHAREHOLDERS at Weir Group have voted overwhelmingly against a new directors’ remuneration package that would have seen executives handed out share awards simply for remaining with the company, regardless of its performance.

After its annual meeting in

Glasgow yesterday, chairman Charles Berry confirmed the policy would not proceed.

The Glasgow engineering firm was forced to abandon the plans after 72 per cent of shareholders voted against the golden handcuffs incentive. Mr Berry admitted that shareholders were “uncomfortable” with the idea as it was not standard UK practice. Such executive retention awards are common in the US, where Weir already rewards

75 senior executives in this manner.

Under the measure all 260 senior executives would have been awarded shares regardless of performance in a bid to “more closely align senior management incentives with shareholder interests”. These shares would have vested in increments of thirds in years three, four and five.

In return, there would have been a reduction in the maximum award available to the most senior executive director from 250 per cent of salary to 165 per cent. No performance or matching shares vested this year under the company’s 2013 long-term incentive plan, after performance targets were missed.

Mr Berry said the policy aimed to tackle the issue of how to effectively recruit, retain and incentivise senior management – across multiple territories – when market conditions beyond their control remain challenging for a sustained period.

“Given the volatility in end markets, the group’s remuneration committee has highlighted the difficulty in setting meaningful financial performance targets over the three-year period required by the current long term incentive plan,” he said.

Under the proposal chief executive Keith Cochrane would have been awarded shares equivalent to 90 per cent of his salary, with 80 per cent awards going to other executive directors.

To mitigate this, performance share awards would have been restricted to 75 per cent of salary for Mr Cochrane and 45 per cent for other executive directors.

Mr Berry revealed the company had held an extensive consultation with shareholders in an attempt to forge a consensus on the new policy. It will now return to hold further talks with shareholders.

Weir operates in markets that have seen huge reductions in commodity prices, forcing the firm to implement £160 million of cost-cutting measures in the last 18 months, and implement a strategy to sell-off £100m of non-core assets. It has laid off around 12 per cent of its global workforce.

Melanie Gee, chairwoman of the remuneration committee, said: “During our consultation we received a wide range of views both on simplification and the structure of long-term incentives.

“Our proposals reflect a middle course based on the feedback received – whilst ensuring the remuneration policy meets our objectives. It is therefore more complex than the views expressed by a number of our shareholders.”

She also highlighted that Weir was one of the first companies to seek shareholder support for a restricted stock programme that applies to all executives.

Mr Berry also defended the plan, saying the Investment Association’s executive remuneration working group recently suggested standard practice in the UK may not be sufficiently flexible and companies should be allowed “to propose the remuneration structure that is in their judgement most appropriate” including consideration of the introduction of restricted stock.

Weir will continue to operate under the remuneration policy which was approved by shareholders in 2014 and which runs until 2017, with awards made today under these rules.

Ahead of its annual meeting,

Weir reported that first-quarter oil and gas orders have plunged by

47 per cent but the firm said cost-cutting means the division will return to profit in the second half of the year.

Shares surged by almost eight per cent as Weir indicated first half

profits would be ahead of expectations. Full year group revenues are now anticipated to be broadly flat on the previous year, slightly ahead of previous expectations.

Mr Cochrane said trading conditions in oil and gas markets reflected further reductions in activity levels in all regions despite the limited improvement in oil prices in 2016.

He reported that the group remained focused on the cost reduction measures which have helped to deliver first quarter profits slightly ahead of expectations.

Mr Cochrane also commented that the company was well-placed to respond when the oil price recovered.

“The market will find its balance at some point over the next 12 to 8 months. It is important that we keep our capabilities because when it turns it could turn pretty quickly.

“Having gone through these tough times, I want to make sure we’re in a position to respond,” he commented.

“There would be nothing worse than having managed our way through this current environment and not being in a position to respond. So we very much have

one eye on the future.”

Having closed its entire North American operations for a week in March as part of creative cost cutting, Mr Cochrane said it illustrated that the company could cut costs but maintain the ability to sustain growth.

Mr Cochrane told Reuters that fall in drilling activity and recent uptick in oil prices would encourage customers to place new orders. “If they want to keep producing they need to start spending money again,” he said.