James Moore: No big payout now, but a golden chance for Cairn chief to display his charity

Outlook: It couldn't have been timed better. Just a day after Vince Cable rushed forward his plans for a crackdown on executive pay, Cairn Energy bowed to pressure from shareholders and withdrew a £2.5m bung plus a £1m donation it had been planning to lavish on its chairman, Sir Bill Gammell, and his favourite charities.

This pot of gold was for Sir Bill's work on the disposal of the group's Indian business. Shareholders were told it was "essential" to incentivise him to "deliver the disposal". Understandably, they have asked why.

Sir Bill had been leading the negotiations to sell off the operation as chief executive, but in the middle of the process was made non-executive chairman. However, he munificently agreed to see the deal through, which meant him retaining some executive responsibilities.

That is where the problems start. Setting aside the fact that elevating a company's chief executive to chairman is considered bad practice, he was already getting a £1.4m payment to compensate him for the move upstairs.

And, anyway, if the deal was so important, why not simply ask him to stay on until its completion, with an interim chairman to run the board? Then he would have been eligible for his ample salary, bonus, long-term incentive scheme and all the other sweeties a chief executive gets.

To be fair, this is no reward for failure. The deal will see £2.25bn returned to shareholders. Cairn's initial investment was about £300m, and it had previously returned £478m in 2007. It will retain a stake worth £1.7bn.

As a substantial shareholder (he owns 3 million) Sir Bill benefits hugely from all of this. Shouldn't that be all the incentive needed to get the deal done?

It is worth noting here that shareholders were given a binding vote on the payment, which was intended to be made in shares, as part of the egm called to approve the disposal.

The vote carried teeth, and Cairn withdrew the payment because its directors knew they might lose.

Perhaps there is wisdom in Mr Cable making votes on remuneration reports binding. There have been warnings about potential unintended consequences of doing this. But if companies act like Cairn and respond before a potential train wreck, there shouldn't be a problem.

This isn't over. Cairn is still intending to hold "talks" with shareholders over what might end up to be a smaller payout. They should resist that too.

Sir Bill has had his reward, and the only issue now is that £1m donation. It seems a shame to deprive the charities, all doubtless worthy.

Sir Bill likes to do his bit for charity. So perhaps, given that he is not short of a few quid, he might like to make good the donation personally? That way it would qualify for gift aid and set Sir Bill apart from much of corporate Britain not only by dint of his performance but by showing he is just as keen to donate his own money as he is on donating his shareholders'.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Guru Careers: Graduate Editor / Editorial Assistant

£16 - 20k: Guru Careers: A Graduate Editor / Editorial Assistant is needed to ...

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Day In a Page

Raif Badawi: Wife pleads for fresh EU help as Saudi blogger's health worsens

Please save my husband

As the health of blogger Raif Badawi worsens in prison, his wife urges EU governments to put pressure on the Saudi Arabian royal family to allow her husband to join his family in Canada
Birthplace of Arab Spring in turmoil as angry Tunisians stage massive sit-in over lack of development

They shall not be moved: jobless protesters bring Tunisia to a halt

A former North African boom town is wasting away while its unemployed citizens stick steadfastly to their sit-in
David Hasselhoff's new show 'Hoff the Record': What's it like working with a superstar?

Hanging with the Hoff

Working with David Hasselhoff on his new TV series was an education for Ella Smith
Can Dubai's Design District 'hipster village' attract the right type of goatee-wearing individualist?

Hipsters of Arabia

Can Dubai’s ‘creative village’ attract the right type of goatee-wearing individualist?
The cult of Roger Federer: What is it that inspires such obsessive devotion?

The cult of Roger Federer

What is it that inspires such obsessive devotion?
Kuala Lumpur's street food: Not a 'scene', more a way of life

Malaysian munchies

With new flights, the amazing street food of Kuala Lumpur just got more accessible
10 best festival beauty

Mud guards: 10 best festival beauty

Whether you're off to the Isle of Wight, Glastonbury or a local music event, we've found the products to help you
Unai Emery’s passion for winning and eye for a bargain keep Seville centre stage in Europe

A Different League

Unai Emery’s passion for winning and eye for a bargain keep Seville centre stage in Europe, says Pete Jenson
Amir Khan and James DeGale’s remarkable Olympic performances were just the start of an extraordinary journey - Steve Bunce

Steve Bunce on Boxing

Amir Khan and James DeGale’s remarkable Olympic performances were just the start of an extraordinary journey
Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf