Director pay in eye of the storm.

Go out on the street and mention the words senior executive bonus and chances are you will hear a less than flattering reference to fat cats.

The debate over how much bosses take home heated up last week as 30% of shareholders took the unprecedented step at the agm of Vodafone Airtouch, the UK’s largest company valued at #228bn, of abstaining or voting against the board.

Their gripe was with a #10m windfall due to chief executive Chris Gent for his part in the successful takeover of German rival Mannesmann – a sum that prompted one enraged shareholder to shout: ‘Can we have money back?’

Separately, an announcement due last week on shareholders voting on directors’ pay failed to materialise from the DTI as parliament wound down for the summer break.

Behind the rebellion at Vodafone is the National Association of Pension Funds, an advisory group that represents fund managers, which advised its members to abstain at the Vodafone meeting.

John Rogers, director of the voting issues service, says the NAPF wants directors to receive rewards subject to proper performance criteria and shareholders should have the right to vote annually on remuneration policy.

Out in UK plc agms, passions are stirring among shareholders, who usually provide Soviet-style 99% plus endorsements of their respective boards’ whims and strategy for the year.

The furore over the Vodafone windfall is the latest in a series of multimillion pound remuneration packages under fire from shareholders, who believe they are excessive.

This summer Marks & Spencer’s new chairman, Luc Vandevelde was also grilled over executive pay increases despite recent trouble at the high street retailer.

Earlier this year, Mike Kinski, the former chief executive of Stagecoach, courted controversy when he left with a #1m golden handshake. And almost a third of shareholders objected to proposed share option proposals for Smithkline Beecham chief executive Jean-Pierre Garnier and FD John Coombe (see pages 1 & 3).

The NAPF’s argument is not with competitive remuneration – it gave its support to Smithkline Beecham which was felt to be in line with performance.

And over the last 12 months, out of 798 company voting resolutions, the NAPF advised shareholders on four occasions to vote against director remuneration packages.

In the meantime, Rogers says the much-vaunted report into modernising UK’s shareholder voting system has ‘disappeared without explanation’.

Byers last year commissioned a PricewaterhouseCoopers survey, which found only seven out of 270 companies chose to put forward their remuneration report for shareholder vote at agms. ‘The PwC study suggests many companies may not yet be achieving a close link between pay and performance,’ Byers concluded in a speech last July. ‘The key principle must be the effective link of rewards to performance.’

Cliff Weight of consultants William Mercer says the problem is not overpayment, but that UK directors are not paid enough. ‘Last year we found that US base salaries were 40% higher than the UK and bonuses five times more – and this year it’s more than likely that UK salaries have fallen further behind the US.’


FDs at dot.coms earn no more than old economy colleagues, a new Arthur Andersen survey has revealed. The report, Directors’ Remuneration on flotation, redresses popular belief that senior executives in the sector outstrip other parts of the economy through base earnings and share options.

‘ millionaires and large payouts can be attributed to the exponential share price growth that many dot.coms have had until recently’, explained partner Bill Cohen at Andersen.

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