'False choice' on SCA incentives The report said performance hurdles for the incentives were weak and it was not clear why an incentive should be paid to Ms Shambly, who resigned in August. UNITHOLDERS in Woolworths spin-off Shopping Centres Australia are being urged to hold off voting on incentives to executives and instead oppose the remuneration report when the company holds its maiden annual meeting next month. Governance adviser ISS said investors were being offered a "false choice" to approve the incentive shares for chief executive Anthony Mellowes and former chief financial officer Kerry Shambly, because the company intended to pay equivalent amounts in cash if the vote went against them. This amounted to a choice between a cash and an equity incentive, rather than a decision on whether to approve an incentive offer. "To the extent that investors generally prefer incentive awards to be settled in equity, it would appear the resolutions not being carried would be against unitholders' interests," ISS said in a report to clients seen by The Australian. The report said performance hurdles for the incentives were weak and it was not clear why an incentive should be paid to Ms Shambly, who resigned in August, given that incentives should be forfeited on resignation, according to the scheme rules. Shopping Centres Australia, a $1.4 billion property trust spun out of Woolworths last November, is seeking approval to issue $1.6 million of performance rights to Mr Mellowes and $156,267 of performance rights to Ms Shambly, who served for eight months before retiring. ISS says the performance hurdles for unit holders were only that the company meet forecasts made in its product disclosure statement for the 2013 and 2014 financial years and that this was not a "rigorous" hurdle. "It is generally accepted that meeting PDS forecasts is not a stretch criteria," the report said. As such the performance hurdles do not appear to be sufficiently challenging. Recommendations to abstain on the three incentive resolutions risk magnifying the power of votes actually cast for or against the resolutions. However, sources said it was unusual for proxy adviser recommendations to garner more than 30 per cent of the vote, meaning the recommendation on the remuneration report could have more impact than those for the specific incentives, which only require a bare majority of votes cast to pass. Under 2011 federal legislation, if more than 25 per cent of shares are voted against a remuneration report, companies record a formal strike. After two consecutive strikes, shareholders can vote to spill the board. Fellow governance adviser CGI Glass Lewis has recommended unitholders vote in favour of all resolutions, including the equity grants, while noting there were concerns about the disclosure of performance hurdles for short-term incentives and "ad hoc" awards of performance rights. "We are concerned that the company has not had an overall long-term strategy for remunerating executives in the 2013 financial year," CGI Glass Lewis said. But it acknowledged that the awards had been granted based on the executives contribution before and after the float of the company, which had developed a comprehensive long term incentive plan that began on July 1.