Executive Pay: The Likely Flashpoints

Stacks Of Coins


Pay campaigners have in the past confined their criticism to companies gifting bonuses to executives who have manifestly failed. Latterly, however, many have grown increasingly uneasy at the size of potential payouts on offer, which have ballooned at many large companies. Tougher laws requiring shareholder approval for large individual bonus payouts have been passed in Switzerland, adding to calls in the UK and elsewhere for payouts to be kept in check. Campaigners calculate BP chief executive Bob Dudley could receive performance-related payouts of up to 923% of his $1.75m (£1.15m) salary. Last year, 13.5% of votes cast at the oil group's annual meeting were in protest – that is, "no" votes or abstentions – over pay deals for Dudley and his fellow directors.


The insurance group is expected to see investors register a protest at its decision to replace long-standing auditor Deloitte with rival KPMG.

This is not because they are keen for Deloitte to stay on – quite the contrary, after the firm received £10m for additional services sold to RSA on top of £6m for audit work. The proposed move from Deloitte has prompted concern because RSA's audit committee chairman, Alastair Barbour, only stepped down as a senior KPMG partner in March 2011. Too close a relationship for some. Meanwhile, big bonuses for chief executive Simon Lee after a 20% fall in pre-tax profits and a dividend cut also sticks in the craw for many. Last year 9% of votes at the AGM were cast in protest over RSA boardroom pay deals.


Most chief executives facing a pay controversy try to absent themselves from the debate, or defer irate questions to the chairman or head of the remuneration committee. Not so Sir Martin Sorrell. In the runup to what he knew would be certain defeat at WPP's meeting last year, he railed against those who suggested he was excessively remunerated. "WPP is not a public utility," he said. His role, he argued, was "to behave like an owner and entrepreneur and not a bureaucrat", and that meant paying him accordingly. Last year some 60% of votes were cast in protest at pay deals for Sorrell and his fellow directors.


Chief executive Sam Laidlaw and four boardroom colleagues shared payouts totalling £16.4m last year. Such rewards have already sparked outrage from unions and fuel poverty campaigners who insist they are unmerited after Centrica subsidiary British Gas raised consumer gas prices by 6%. Coincidentally, the rise in payouts for executive directors was also 6% – gains the company insisted were based "squarely on performance". That was not an argument that convinced all shareholders last year. Some 16.2% of votes cast at the 2012 annual shareholder meeting were in protest at the pay arrangements for Laidlaw and his fellow directors.

National Express

A delegation of American trade unionists is expected to return to National Express's shareholder meeting this year, determined to highlight what they see as the company's moves to block Teamster union recruitment efforts at school bus depots in America.

US union leaders said they had held talks with institutional investors and members of parliament about their concerns. The group is unlikely to face pressure this year from activist investor Elliott Advisors, which has in the past agitated for strategic changes. Elliott sold half of its near-20% holding last month and described itself as a "strong believer in National Express's management team and its strategy".


Chief executive Tidjane Thiam surprised some by retaining the support of shareholders following the group's ill-fated takeover bid for Asian competitor AIA three years ago. Last month, however, that sorry episode came back to haunt the FTSE 100 boss when he became the highest-profile figure to be personally censured by the Financial Services Authority. The regulator suggested he had not behaved "openly and cooperatively" towards it over the proposed deal, and went on to fine the group £30m.

Despite the huge fine and the censure, Thiam has received a £2m bonus. Last year the group faced a protest vote of 33.6% over its boardroom pay arrangements. Thiam, however, enjoyed near-unanimous support, with 99.1% of votes in favour of his re-election to the board.

Powered by Guardian.co.ukThis article was written by Simon Bowers, for The Observer on Sunday 7th April 2013 00.06 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010


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