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'.
- 1 Home Office says Nigerian asylum-seeker can’t be a lesbian as she’s got children
- 2 What happens to your body when you give up sugar?
- 3 Drugs Live cannabis trial: Hash is less harmful than any other drug, expert claims
- 4 Turkish Airlines flight TK 726 crash-lands on Nepal runway amid dense fog
- 5 Apple and Google users being spied on for a decade because of 'Freak' security flaw
Durham Free School: 'Creationism taught at' free school facing closure
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Ukip would cut billions from Scottish budget to fund English tax cuts
End of the licence fee: BBC to back radical overhaul of how it is funded
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
Boris Nemtsov shot dead: Outspoken Putin critic who had expressed fears for his life is killed near the Kremlin
iJobs Money & Business
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...
£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...