Pearson chief Fallon awarded 20% pay rise despite losses

Pearson c.e.o. John Fallon has been awarded a 20% total pay rise despite the fact the company made a £2.6bn loss in 2016 and in the year it also made 10% of its global workforce redundant.

According to Pearson's annual accounts published on Friday (24th March), Fallon will receive £1.518m in total remuneration, up from £1.26m in 2015, despite the fact he admitted he and the company "got it wrong" last year, which resulted in the scrapping of its £800m profit target for 2018.

In line with a general pay freeze agreed in 2016 for all senior management, including executive directors, Pearson's c.e.o.'s base salary has been frozen (up from £776,000 in 2015 to £780,000); however total remuneration was boosted by an increase in allowances and benefits, up 37%, as well as by an annual bonus of £343,332. 

The report says "discretion has been exercised" with respect to annual incentives, and in 2015 Fallon did not receive a bonus at all. The rise in his allowances and benefits meanwhile was said to reflect "an increase in cost of car benefit and travel expenses".  

In a show of faith in Pearson's changing fortunes - it is currently undergoing a transition to digital - the publisher has since emphasised Fallon intends to use his full bonus to purchase shares in the company.

A Pearson spokesperson said: “The Pearson board has decided John Fallon will receive a limited bonus, in line with the company’s broader bonus policy, and reflecting Pearson achieving its 2016 profit and eps guidance, delivering strong operating cash flow, and delivering a major restructuring successfully.

“However, given Pearson’s lower long term profits guidance, the board is freezing the c.e.o.’s base pay in 2017 for a second year running, and will also reduce the economic value of the c.e.o.’s 2017 long-term performance related shares, which are yet to be awarded.

"After paying tax, and subject to the usual share dealing rules, John Fallon intends to use his full bonus payment to purchase shares in the company."

Sales for Pearson in 2016 were £4,552m and adjusted operating profit £635m. "Key achievements" for the company in 2016, according to the report, include a £275m cost reduction it said had made Pearson a "leaner, more focused" company - an aim it continues to pursue anticipating the sale of its 47% stake in Penguin Random House this year - as well as seeing £700m more organic investment in its portfolio to drive digital transformation and an increase in digital and services revenues to 68%. 

Fallon has previously said online degree partnerships represented the company's "most exciting long-term opportunity". It this week unveiled a new partnership with Leeds University to develop and deliver 12 online Masters-level degree programmes.