Anger mounts over 'finder's fee' payments to directors

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The Independent Online

Investor anger is mounting over the practice of paying directors special bonuses for handing over their job to a successor. There is particular concern over the £250,000 to be pocketed by United Business Media's chief executive Lord Hollick for "managing the succession".

Investor anger is mounting over the practice of paying directors special bonuses for handing over their job to a successor. There is particular concern over the £250,000 to be pocketed by United Business Media's chief executive Lord Hollick for "managing the succession".

Also in the firing line over the issue is the building materials supplier Travis Perkins and the terms of the proposed new incentive plan at the oil giant BP. The three companies will soon face shareholders at annual meetings. David Somerlink, of Pirc, the advisory service for investors, said: "All these companies must demonstrate exactly how this represents pay for performance." Last year, Sainsbury's was criticised by shareholders for proposing that its chairman, Sir Peter Davis, be given a special bonus for finding his replacement.

UBM revealed in its annual report this week that it had decided to give Lord Hollick a bonus of £250,000 "based on achievement of a successful handover to the new group chief executive David Levin".

The pair are working together only from Wednesday this week , when Mr Levin, an external appointee, started the job, to 20 May, when Lord Hollick formerly retires from the company he has led for the past 30 years. The payment is separate from the £100,000 that Lord Hollick will be paid for the 12 months after his departure "to provide consultancy services".

The UBM annual report also showed Lord Hollick's pension pot of £14.5m will give him an annual pension of £726,000. Last year he was paid £1.4m. UBM declined to comment.

Travis Perkins's chief executive, Frank MacKay, will collect an additional bonus of £100,000 this year "in consideration for effecting an orderly transfer of responsibilities" to Geoff Cooper, who joined on 1 February. This is despite the fact Mr MacKay will take his regular salary - of £510,000 - until he "retires" in October, though he stood down from the top job in February. Paul Hampden Smith, Travis Perkins' finance director said: "This is to reward Frank for an orderly handover to Geoff."

Shareholders were not consulted before the boards of UBM and Travis Perkins decided to award these payments.

Sarah Wilson, the managing director of the shareholder group Manifest, said: "You'd have thought that eventually handing over to a successor would be part of the job description for a chief executive."

BP has been through extensive talks with shareholders over remuneration, to a mixed reaction. There is a separate and explicit element in the proposed pay package for its chief executive, Lord Browne, that relates to a possible future payment for handing over to a successor - which may be worth up to twice his salary - nearly £3m.

Geoff Lindey, an adviser on corporate governance to the National Association of Pension Funds, one of the most powerful shareholder bodies, said: "If a company disaggregates the package to show and justify these sorts of payments, that's fair enough. If someone just gets an additional payment for it, on top of their package, that is completely inappropriate."

Mr Lindey would not comment on particular companies but the NAPF is not advising members to vote against BP's remuneration deal. It is thought there is much more concern among investors about the UBM and Travis Perkins payments.

Pirc's Mr Somerlink said the scale of rewards for directors, proposed at BP, were "excessive", and the organisation is urging shareholders to vote against the remuneration package.

At BP, all directors can earn a bonus of up to five-and-a-half times times base salary while Lord Browne can earn an additional two times the salary for other criteria, including issues related to a successor.

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