Evaluating Johnny Thomson’s Pay Package at Diploma

When Johnny Thomson took on the role of chief executive at Diploma in February 2019, eyebrows were raised at the generous pay package he was offered. Despite joining the group halfway through the financial year, Thomson was promised a full year’s bonus and a salary of £670,000, which was significantly higher than his predecessor, Bruce Thompson. The decision was met with skepticism, and at the next annual general meeting (AGM), only 56 per cent of the votes were in favor.

Diploma, an international group of businesses supplying technical products and services valued at £1.5bn with around 1,800 employees, seemed like an unlikely fit for Thomson, who had previously worked at Compass, a much larger company with a global presence. However, John Nicholas, the chairman of Diploma, highlighted Thomson’s international experience and track record of delivering results.

The negotiation of Thomson’s pay package was a delicate balance for Diploma, as they were in need of a strong leader after a failed attempt to replace Bruce Thompson. Thomson’s previous salary at Compass was substantial, and Diploma had to match it to secure his services. This led to a controversial pay structure that included a high salary, performance-related bonuses, and long-term share awards.

Since joining Diploma, Thomson has overseen significant growth through a series of strategic acquisitions. The company’s value has increased, and it is now a FTSE 100 company worth £6.3bn. Thomson’s leadership has been rewarded with a rising share price, leading to a substantial increase in the value of his shares and performance-related payouts.

Current Position and Future Outlook

Under Thomson’s leadership, Diploma has diversified its business and focused on growth areas such as the controls segment, which now accounts for over half of revenues. The company has managed to navigate challenging trading conditions in its seals business and remains optimistic about its prospects in the face of global economic uncertainties.

Thomson’s performance at Diploma has exceeded expectations, with the share price multiplying by a factor of about 3.5 since he took on the role of chief executive. Despite criticism from some quarters about the soft performance conditions attached to his pay package, Thomson’s track record speaks for itself.

As Diploma continues to expand and evolve under Thomson’s leadership, investors will be closely watching to see if the company can sustain its growth trajectory and deliver value to shareholders in the long term.