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9 August 2019Insurance

Argo to change exec pay and cut board numbers in corporate governance refresh

Argo Group, the specialty re/insurer, has confirmed it will introduce proposals to cut the number of board directors from 13 to 11 and change the way they are elected, as well as confirming changes to executive pay.

The proposal to begin a ‘phased declassification of the board’ would end the staggered elections of directors and will mean the entire board stands for election annually after the 2022 AGM.

The company will present the proposed board changes, which are part of its revision of its corporate governance practices, at the 2020 annual general meeting.

Gary Woods, Argo chairman, said: “These measures support continued value creation for all our shareholders and demonstrate our commitment to ensuring alignment with our shareholders.

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

The re/insurer’s board also unanimously approved changes to the company’s executive compensation program to “enhance the alignment between compensation and long-term shareholder value creation”.

Compensation changes, which will come into effect at the start of the firm’s 2020 fiscal year, include aligning its long term incentive plans (LTIP) with the execution of the company's long term strategy. The company will start measuring LTIP performance awards over a longer three-year performance period, compared to the previous one-year period, and awards will be earned based on return on equity and book value per share metrics.

Stock ownership guidelines will change so the CEO’s ownership guideline will be equal to six times base salary, compared to the previous multiple of five times base salary, to “underscore commitment to driving long-term performance on behalf of all shareholders”.

Multiples of stock ownership will also increase for the CEO’s other 'named executive officer' to be equal to three times base salary (the prior multiple was two-and-a-half times base salary), and directors will be required to own stock equal to five times the annual cash retainer they receive for service on the board (an increase from three times the annual cash retainer).

Further governance changes are in the pipeline as the re/insurer confirmed in May 13, 2019, in a Securities and Exchange Commission filing, that it intends to continue its proactive board member refreshment process. This will include a further reduction in the size of the board to 10 members over the next three years as some directors retire and new directors are recruited.

“The board believes that this orderly refreshment process, with periods of overlapping service among current and new directors, provides stability and will ensure the effective transfer of key institutional knowledge beneficial to overseeing the company’s business,” an Argo statement said.

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