ABERDEEN-based oil explorer Faroe Petroleum blamed a change in shareholder sentiment as it ditched plans for a controversial incentive scheme which could have seen chief executive Graham Stewart take a 1% stake in the company.
Faroe also suffered a large rebellion against its pay report at its annual investor meeting in London.
The U-turn on Faroe's plans for a new "exceptional performance incentive plan" comes after a so-called shareholder spring, during which companies including Edinburgh oil explorer Cairn Energy, insurer Aviva and car dealership Pendragon have lost advisory votes on their remuneration policies.
The Herald revealed yesterday that Faroe was facing a rebellion after some shareholders and corporate governance experts criticised its new incentive scheme for its generosity, dilution of existing investors, reliance on share price returns, and for potentially paying out after a takeover.
Chairman John Bentley told Faroe's shareholder meeting in London: "Since the publication of the notice of annual general meeting in April 2012, the company has been in further dialogue with its larger shareholders. Following those discussions, the company intends to make a number of changes to the proposed Faroe Petroleum exceptional performance incentive plan (EPIP)."
Faroe, which is listed on the Alternative Investment Market, therefore cancelled a vote on the scheme. Mr Bentley added: "A further announcement will be made in due course."
Tim Read, chairman of Faroe's remuneration committee, said: "Following requests from its institutional shareholders to align management interests with shareholder interests the long-term incentive scheme was designed in conjunction with independent remuneration consultants and with the support of the major shareholders.
"The context of management incentivisation has clearly changed over the last few weeks and the board felt it appropriate to revisit the issue to make changes to the long-term incentive scheme to re-align it with current shareholder sentiment."
Roger Lawson, chairman of private investor group ShareSoc which lobbied against the bonus plan, told The Herald: "The company was right to reconsider this matter."
Faroe, which was not obliged to put its incentive plan to a vote, is likely to propose another scheme at next year's investor meeting.
The board had hoped the scheme would incentivise managers of the 15- year-old company because the shares and accompanying targets would give them a stake in Faroe's future success.
A company spokesman said earlier this week the media would not be admitted to the shareholder meeting and Faroe was yesterday unable to provide details of how investors voted.
But one shareholder told The Herald Faroe's pay report passed with just 62% support. Including withheld votes, 43% of investors failed to back the report.
The meeting also saw Faroe fail for the second successive year to get the necessary 75% backing for a resolution allowing it to issue new shares.
Meanwhile, Faroe also announced yesterday that drilling has begun on the Clapton prospect in the Norwegian North Sea, in which it has a 40% stake and is the operator. It is Faroe's first operated well in Norway.
Mr Stewart said: "We are pleased to announce the spudding of Faroe Petroleum's first operated well in Norway. This is an exiting period for Faroe."
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