David Prosser: The man from the Pru enjoys an undeservedly generous payday


Outlook Here are two numbers for you: £377m and £50,000. The first number is the cost to Prudential, as detailed in its annual report yesterday, of its failed bid for AIA, the Asian insurance company. The second figure, also taken from Pru's report, is the amount of bonus the insurer's chief executive, Tidjane Thiam, missed out on at the end of 2010. Despite presiding over the AIA botch, Mr Thiam collected a bonus of £1.57m, 97 per cent of the £1.62m that was the maximum he could have theoretically earned.

As reversals of fortunes go, this one is impressive. Last spring Mr Thiam came within a whisker of losing his job. Several shareholders called for his resignation following the AIA debacle, which saw Prudential forced to withdraw from the deal because of an investor revolt and a regulatory roadblock it hadn't noticed being built. Six months later, Pru's remuneration committee decided Mr Thiam was due all of his bonus other than – relatively speaking – some small change.

No wonder people take such a cynical view about the leaders of Britain's biggest businesses – and not just at the banks. This bonus is shameless in its reckless disregard for accountability or responsibility. In the bulging folder of stories about rewards for failure in the boardroom, Mr Thiam's pay deal will take its place close to the top.

Let us be fair and present the case for the defence. It is that aside from the AIA misadventure, Pru's performance was impressive: better-than-expected profits enabled it to raise its dividend by 20 per cent. Also, Mr Thiam has decided to take his whole bonus in shares rather than cash (normally, it would be half and half) with the award being deferred for three years. This is intended to underline Mr Thiam's commitment to the company.

Hmm. If Prudential was doing so well, even in Asia itself, why did its chief executive feel the need to bid for AIA in the first place? As for the deferred bonus, Mr Thiam will know that any company seeking to test his loyalty to Pru would be certain to offer him compensation for any payment foregone were he to jump ship. Sure, he'll have to wait a bit longer for his bonus now (and risk a share price setback) but there's no question of him not receiving the money.

Mr Thiam has not always shown the best judgement. In the run up to the AIA deal, he had to back out of an agreement that would have seen him take up a non-executive directorship at Société Générale. Shareholders understandably felt their chief executive, who had been in the job just six months at the time, had enough on his plate.

Accepting this award looks like another miscalculation. Dividend hike notwithstanding, Prudential's shareholders should say as much when they vote on the company's remuneration report at next month's AGM.

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