Shareholders push back on NEXTDC’s $150m growth incentive plan

Shares in data centre operator NEXTDC (ASX: NXT) fell by five per cent today after a majority of investors rejected the company’s remuneration report, which is tied to a $150 million executive bonus plan.

At the AGM, 72 per cent of shareholders voted against the remuneration report, following advice from governance advisory firms CGI Glass Lewis and Institutional Shareholder Services to oppose the large bonus package.

Under Australian corporations’ law, a ‘no’ vote of 25 per cent or more on a remuneration report counts as a ‘strike’. A second strike at the next AGM would force a shareholder vote on whether to spill the board.

The backlash centres on NEXTDC’s new growth incentive plan (GIP), unveiled to shareholders eight months ago, which sets up a potential $150 million payout for the CEO and senior leaders if the company hits certain share price targets.

Under the structure, CEO Craig Scroggie stands to receive $112 million in stock, which would only come to fruition if NEXTDC’s share price reaches $30.82 by August 2030.

A further $100 million in performance rights would be issued to executives and a select group of senior managers as an incentive to stop them from jumping ship to other rivals such as AirTrunk and Goodman Group.

Off the back of the rejected remuneration report, shares fell by five per cent today to $13.82 each at the time of writing.  

When the GIP was revealed to shareholders in February, NEXTDC remuneration and nomination committee chairman Stuart Davis noted that as the company "continues to grow both in Australia and the broader region" it seeks to "add depth and new functions" to the organisation.

"That task is becoming increasingly difficult to fit within our existing remuneration structure," he added.

"We are consistently coming up against very different compensation structures offered by a wide range of privately held organisations backed by global financial sponsors, North American listed peers, as well as other organisations not subject to standard ASX-listed remuneration structures."

Founded in 2010, NEXTDC is Australia’s largest locally owned and operated data centre provider, providing organisations with direct access to public cloud platforms, networks, and IT services infrastructure. The company operates a total of 17 data centres across Australia, New Zealand and Asia.

At the AGM, the Brisbane-based company reported that net revenue rose 14 per cent to $350 million in FY25, while EBITDA rose by six per cent to $216.7 million.

NEXTDC also secured 72.2 megawatts of new contracted utilisation during the year, reflecting a 42 per cent year-on-year increase.

After securing an extra $3.5 billion in debt funding, the company now has $6.4 billion in total borrowing capacity and ended FY25 with $5.5 billion in available liquidity. The majority of that - $5.3 billion - sits in undrawn debt facilities.

The company alo noted that the revamped debt structure locks in better terms, pushes out any repayments until FY30 and reduces financial covenants to just two, providing more flexibility and a lower cost of capital.