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Argo to alter exec pay, shareholders to vote on board changes

9th August 2019 - Author: Charlie Wood

Specialty re/insurer Argo is to alter the way its executives are compensated, whilst also announcing a series of board proposals due to be put forward to shareholders.

mark-watson-argoThe move follows a messy back and forth between Argo and its fourth-largest shareholder Voce Capital Management, following accusations that the re/insurer’s Chief Executive Officer, Mark E. Watson III, had for a decade perpetuated “shockingly high and shockingly inappropriate” corporate expenses.

A very public back-and-forth ensued, with Voce arguing that Argo’s apparent sub-par average return on equity (ROE) of less than 6% over the past ten years had been driven by gross misallocations of capital on “wasteful items and frivolous vanity sponsorships” at the expense of shareholders.

Argo hit back, stating that Voce’s accusations highlighted “absurd and inaccurate” financial metrics and consisted of nothing more than speculation.

Argo also underlined the “critical expertise and independence” of its board, adding that it has the necessary skills and experience to oversee both near and long-term strategy.

The back-and-forth culminated in Voce backing off after two US states revoked its previously-approved board nominees, a development that Voce said was “clear and irrefutable” proof of Argo’s active role in lobbying the various Departments of Insurance.

Now, roughly three months later, Argo has announced plans to present two proposals at the 2020 AGM that would see a process of phased declassification of the Argo Board of Directors, after which the entire board will stand for election annually.

The second proposal would see the maximum size of the Board reduced from 13 to 11.

Furthermore, Argo’s board has unanimously approved a series of changes that will see an alteration to the way its executives are compensated.

Performance awards will now be measured over a three-year performance period (previously a one-year period) and will be earned based on Return on Equity and Book Value Per Share metrics.

The CEO’s ownership guideline will be equal to six times base salary, having previously been set at five times base salary.

Other named executive officer ownership guidelines will be equal to three times base salary, instead of two-and-a-half times base salary.

Additionally, Directors will be required to own stock equal to five times the annual cash retainer they receive for service on the Board of Directors, rather than the previous requirement of three times.

“These measures support continued value creation for all our shareholders and demonstrate our commitment to ensuring alignment with our shareholders,” said Gary Woods, Chairman of the Board.

“We value the input we receive from our shareholders and maintain a productive dialogue with them.”

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