BG Group is facing mounting criticism from shareholders over a £25m pay deal for its new chief executive, with a growing number of influential advisory bodies raising concerns about the package offered to Helge Lund.
Railpen, which manages £20bn of pension funds for railway workers, is also urging investors to reject the pay deal for Lund, who has been hired from Statoil in Norway and is due to join in March.
The recommendations put pressure on the BG chairman, Andrew Gould, who has been standing in as chief executive since April and recruited Lund.
The advisory group Glass Lewis is thought to have joined ISS, the Investment Management Association, Manifest and Pirc in issuing warnings about Lund’s pay deal.
Manifest has suggested the meeting scheduled for 15 December to ratify the pay award should not go ahead. Other shareholders including Royal London Asset Management have said such a move would allow more opportunity for discussion.
Gould and the chairman of the remuneration committee, Sir John Hood, are now trying to persuade investors to support the deal the BG board has offered Lund, who is highly respected for his record at the Norwegian state oil company.
The package caused controversy with investors because it breaches a pay policy they agreed to only six months ago.
Lund is being offered a one-off £12m in shares and up to £13.5m a year if he hits performance targets. The package, which includes a salary set at £1.5m for five years, is around seven times more than he earned at Statoil.
BG is the first major company to call a vote on a pay package that breaks its own policy since Vince Cable, the business secretary, introduced new rules last year guaranteeing shareholders such a say.
Deborah Gilshan, the corporate governance counsel at Railpen, said she would not back the award.
“Railpen will not be supporting this pay package at the meeting on 15 December as we do not consider it is in the long term interests of our beneficiaries.
“We are now calling on the fund management industry to consider the long-term interests of their clients by voting against this,” she said.
“Also, that this is a situation no board should put its shareholders in and that our concerns are not limited to the situation at BG Group itself but the wider implications it has for the UK marketplace,” she said.
Legal & General, which owns 2.7% of BG’s shares, spoke out earlier this week to say that BG could set a new precedent by abandoning its pay policy so quickly.
Aviva also said it was concerned.
The row over pay comes as BG’s shares slide following the decision by the major oil producing countries on Thursday not to cut production to shore up prices. BG’s shares were the biggest fallers on the FTSE 100 on Friday, down more than 7% by lunchtime.
A BG spokesman said: “We believe Helge Lund is the right person to lead BG Group. His proposed remuneration is competitive in the international oil and gas industry. The shareholder vote on Helge Lund’s pay is in line with the letter and spirit of corporate governance legislation.”
The company has warned shareholders that Lund is “not obliged” to join the company if the share award is not approved.
“There is a risk, therefore, that if the resolution is not passed at the general meeting, Mr Lund will not join BG Group and the company would need to recommence its chief executive search process,” the company said.
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