Your Pay Is Now on Its Way: Deliveroo’s CEO receives another bumper pay rise

April 12, 2022

4 min read

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What's going on here?

The CEO of Deliveroo, Will Shu, has seen his salary rise 16% this year, up to £600,000, on top of a share pay out of £5.2m in December 2021.

What does this mean?

Shu’s latest 16% pay rise comes after his salary rose 47% in 2021. Over the next six years, he is also set to receive £30m in share payouts including a £5m sum planned for April 2023. However, his share package was originally worth over £105m when Deliveroo went public in March 2021 – in what has been called the ‘worst IPO in London’s history’, Deliveroo’s shares fell 26% in their first day trading. Since listing, Deliveroo’s price peaked in August 2021, and hit its lowest value on 4 March 2022. 

The falling share price has also affected the payouts due to Shu’s co-founder, now chief financial officer, Adam Miller. Whilst his base salary has increased 14%, like Shu’s, his payout has been cut as the company’s board of directors decided to change the total number of shares he is entitled to by changing the date, and associated share price they will use to calculate his payout. Miller faces a similar cut to his long-term service awards due soon.

What's the big picture effect?

Deliveroo’s shares have been falling in value since August 2021, primarily because of investor concerns about the company’s employment models and profitability.

The main concern for investors is the rising cost of living. Fuel costs have been an ongoing worry for many consumers in the past year. However, the war in Ukraine and associated sanctions on Russia caused a shock to oil prices and caused more volatility. Whilst many deliveries are made by bike, Deliveroo’s drivers are facing a rise in the cost of their work for similar pay, as they don’t receive any fuel allowances. If fuel prices continue rising, customers may see their order bills and delivery charges rise too. Longer wait times are also possible, as the diminishing profit margin puts off new drivers. 

Consumers are tightening their belts as the UK’s real disposable household income falls this year. Inflation has been rising since the start of 2021 and has now hit 7.7% on the Consumer Price Index (CPI), which measures the price of 650 common items. Some items, especially those in supermarkets’ cheaper ‘essential’ ranges have risen much more – for example, some Asda food products had doubled in price within a year. Households are facing soaring electricity and gas bills, too, as the price cap (set by regulator Ofgem) was increased on 1 April 2022. Direct debit customers face a rise of £693 a year, at the current cap, and those on prepayment meters face the largest increases. Families are increasingly choosing between food and heat, and Deliveroo is less of an option. The cost of living crisis is therefore likely to have a large impact on sales through the app, hitting its revenue and profits. This is a key concern for investors, as their dividends will be reduced, and helps explain the sustained fall in share price as the firm becomes a less attractive investment.

For most of its mainstream existence, Deliveroo has been under scrutiny for its lack of formal employment structures for its riders. The Independent Workers Union of Great Britain (IWGB) have been fighting for riders to be recognised as employees and gain employee rights and benefits, such as sick pay and pensions. In February 2021, the Supreme Court judged Uber drivers should receive employee rights, but in June 2021, the Court of Appeal ruled Deliveroo riders were self-employed and therefore not entitled to the rights gained by Uber drivers, like minimum wage. This has been a sticking point on Deliveroo’s public image, and with the cost of living rising, it is not likely to go away.   

However, Deliveroo has recently announced a new partnership with WHSmith, which saw its share price rise almost 10% on announcement day. Despite pandemic self-isolation restrictions having been lifted in February 2022, consumers have become accustomed to wider ranges of products available for rapid delivery. Most major supermarkets are now available on either Deliveroo or Uber Eats, and new startups such as Getir focus exclusively on quick groceries. Deliveroo will stock over 600 WHSmith products offering the same delivery time frame as its food outlets. Branching out now may be the start of Deliveroo’s rapid expansion into other retail sectors, but it may also upset investors who prefer a defined identity and focus.

So long as the cost of living continues to rise, it remains to be seen whether Deliveroo’s co-founders can sustain their large compensation packages – the share price may continue falling as fuel prices hit consumers and riders alike.

Report written by Phoebe Turner

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