The recent controversial statements made by the 47th US president regarding the Panama Canal have caught the attention of key players in the shipping industry, including Braemar (BMS) and Clarkson (CKN), two prominent shipbroking groups quoted on the London market. Geopolitical uncertainties are on the rise, leading to an increase in freight rates. This, in turn, boosts commissions and ultimately the pay of brokers within these companies.
Shipbroking is a people-centric business, with broking teams at Braemar and Clarkson playing a crucial role in matching cargoes with ships. For Braemar, this aspect accounts for just over two-thirds of their revenues, while for Clarkson, it makes up about four-fifths. The remaining revenue is generated from providing market advice, financing services, and acting as intermediaries for ship transactions.
Brokers at these companies earn their pay through commissions, with their bonuses tied to the profits generated by their respective teams. In 2024, James Gundy, Braemar’s chief executive, received a bonus of £2.35mn on top of his £475,000 salary, while the chief operating officer earned a bonus of £1.125mn. At Clarkson, the remuneration committee sets a profit floor each year, with executives receiving bonuses based on a percentage of profits above that threshold. In 2023, Andi Case, Clarkson’s chief executive, received a bonus of £10.4mn out of a total bonus pool of £13.1mn.
The pay structure in the shipbroking industry differs from other sectors, with annual bonuses playing a significant role. Gundy and Case receive the majority of their bonuses in cash, with a small portion deferred as shares. This is contrary to the typical 50/50 split seen in other industries. Both executives have significant ownership stakes in their respective companies, aligning their interests with those of shareholders.
Despite the atypical nature of their pay structures, both Braemar and Clarkson defend their practices as effective and industry-standard. The competitive landscape in shipbroking relies heavily on personal relationships and market knowledge, with larger firms like Clarkson and Braemar leveraging their market data and intelligence to stay ahead. The industry may see consolidation driven by AI and data-driven solutions in the future.
The recent focus on the Panama Canal and the potential implications of US intervention have added another layer of uncertainty to the industry. Climate change-related challenges, such as fluctuating water levels, further complicate the situation. As geopolitical tensions continue to escalate, companies like Braemar and Clarkson may see increased demand for their services.
In conclusion, the shipbroking industry faces a period of uncertainty ahead, with potential disruptions creating opportunities for companies like Braemar and Clarkson. Shareholders are likely to continue supporting the current pay structures, given the unique nature of the industry and the value provided by these companies.