Pearson’s pricey CEO will rile shareholders

The company logo is displayed outside the Pearson offices in London, Britain, August 4, 2017. REUTERS/Neil Hall Acquire Licensing Rights

LONDON, Sept 20 (Reuters Breakingviews) – Pearson (PSON.L) is baiting shareholders with its choice of new CEO. On Wednesday, shares in the $7.5 billion education company fell 5% after it announced that Chief Executive Andy Bird would resign after less than three years in the post, to be succeeded by Microsoft (MSFT.O) executive Omar Abbosh. The timing of the departure is a surprise given that the 59-year-old Bird, a former Disney executive, had managed to boost the share price by more than 60% since late 2020 and is on course to deliver a mid-teens operating margin in 2023, two years ahead of schedule.

Investors may also have concerns about Abbosh. The 57-year-old will receive 13 million pounds’ worth of cash and restricted shares on top of his normal pay as compensation for leaving Microsoft. Such generosity is questionable considering that in April nearly half of the London-listed company’s shareholders voted against a pay package of more than 8 million pounds for Bird. There’s also a risk that Abbosh’s incentive structure may encourage him to attempt a radical pivot. Despite its greater digital focus, Pearson’s revenue is expected to flatline over the next three years, LSEG forecasts show. After years of profit warnings and missteps, Pearson investors are right to question whether the new boss is value for money. (By Aimee Donnellan)

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Editing by Francesco Guerrera and Oliver Taslic

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