Pay and performance on the table again

It’s time to look at how much bosses get and whether they are worth it

Ross McEwan, chief executive officer RBS,  will take the flak over bankers’ bonuses  at the annual meeting. Photographer: Simon Dawson/Bloomberg

Ross McEwan, chief executive officer RBS, will take the flak over bankers’ bonuses at the annual meeting. Photographer: Simon Dawson/Bloomberg

Wed, Jun 25, 2014, 01:00

Shareholders are out in force this week as the annual meeting season continues apace, with gatherings scheduled for investors in Royal Bank of Scotland, WPP and Tesco.

All are expected to be fractious affairs. At Royal Bank of Scotland, which is still 80 per cent-owned by the taxpayer, bankers’ bonuses are likely to top the agenda again. Research published by the Robin Hood Tax Campaign ahead of the RBS meeting in Edinburgh this afternoon show the bailed-out bank has paid out £3.4 billion in bonuses over the past four years. Taking the flak for the first time at the meeting will be Ross McEwan, who replaced Stephen Hester as chief executive last autumn.

Shareholder approval

RBS had initially intended to ask for shareholder approval to pay bankers bonuses of up to 200 per cent of their salaries but was forced to drop its plans after opposition from the government. Like other banks, it is still paying 100 per cent of salaries in bonuses and also sidestepping bonus cap rules by paying special allowances to its senior staff.

RBS shareholders are being advised by the shareholder lobby group Pensions and Investment Research Consultants (PIRC), to vote against the bank’s remuneration policy. PIRC says the ratio of CEO pay to average employee pay is excessive and that it is disappointed the bank has found ways to “circumvent the spirit” of the new European bonus rules.

Excessive pay will also be topping the agenda at the WPP meeting, also being held today.

At issue, once again, will be the pay package of chief executive Sir Martin Sorrell. Despite a sizeable protest vote at last year’s annual meeting, the WPP remuneration committee has again approved a huge package for Sorrell, raising it to a little under £30 million, mostly made up of long-term share incentives, up from £17.5 million the previous year. Pay has been an issue at the advertising group for years – in 2005, Sorrell’s package was an extraordinary £50 million. PIRC is advising shareholders to throw out the pay report, as is the Local Authority Pension Fund Forum (LAPFF).

The LAPFF is critical of the complexity of the variable pay arrangements at the group, which it says can lead to pay awards reaching a potential of more than 1,400 per cent of base salary. These are “out of step with shareholder and community expectations of reasonable reward for effort,” it said.

WPP has, at least, performed better than Tesco, which rounds off the week with its annual meeting on Friday. It’s not so much pay as the company’s poor performance that is expected to be the focus of some hostile questioning from investors, who have recently seen their shares slither to a ten-year low.

Worst performance

Chief executive Philip Clarke will be the focus of investor anger, but chairman Sir Richard Broadbent is likely to come under fire too. Earlier this month Tesco reported its worst performance in decades, with sales in the core UK supermarkets business accelerating their slide. Market share is at a 10-year low.

Clarke has pleaded for time to turn the business round but there are growing concerns in the City over that his turnaround strategy is not working.

Clarke will at least be spared the indignity suffered by Dalton Philips, the chief executive of Morrison’s, when former chairman Sir Ken Morrison turned up at the annual meeting this month to berate him.

In an extraordinary public tirade, the 82-year-old dismissed Philips’ management strategy as “bullshit”. Former Tesco boss Lord MacLaurin might be one of the few not calling for the chief executive’s head. Fiona Walsh is business editor of theguardian.com

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