Expert Corporate Governance Service (ECGS)
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Etude de l'AG du 05/05/2017

Several top shareholders in the Company are reportedly calling on the Board to review John Fallon’s role as Chief Executive after the Company reported another profit warning. This would be the fifth since he took charge. He also came under pressure from investors after the Company posted a record loss of £2.6bn for the year and for failing to anticipate a steep decline in the Company’s sales in the US, which suffered as more students chose to rent books from retailers such as Amazon rather than buying them.

The Company posted a record £2.6bn loss for last year after it took a massive writedown on its North American higher education business. although US revenues rose 1% on a headline basis to £2.98b, stripping out the effect of the pound’s fall, the Company was still down by 10%. However, sales edged up £9m to £4.55bn, while adjusted operating profits fell to £635m from £723m from the year before. This led to the Company scrapping its profit forecasts and forced to slash its dividend. The Company’s

aims for the coming year is to be more efficiently run and reducing its exposure to certain delivery services to focus on its online business.

Item 13: The changes proposed to the Remuneration Policy do not adequately address concerns over the quantum of remuneration or the reliance on EPS as a performance measure for both the STI and the LTI.

Item 14: Approve the Remuneration Report. The structure is unacceptable. Total variable remuneration exceeded guidelines. Both the STI and the LTI are overly reliant on EPS as a performance measure.

Item 15: Re-appoint the Auditors. PricewaterhouseCoopers LLP (PwC) has been the external auditor for the Company since 1996, when they were appointed following the last audit tender. The auditor's tenure exceeds ECGS guidelines and may undermine independence.

Pearson PLC

Pearson is engaged as a learning company. Co. provides content, assessment and digital services to schools, colleges and universities, as well as professional and vocational education to learners to help increase their skills and employability prospects. Co.'s content includes: Bug Club, a school phonics reading programme for children; and enVisionMATH2:0, a maths curriculum. Co.'s assessment includes its U.K. qualifications, which is an awarding body, offering both academic and vocational qualifications. Co.'s services include its online programme management, which partner with colleges and universities to extend the reach of their degree programmes by scaling online.


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