One of Britain's top insurers risks being dragged into the row over fat-cat pay today after it emerged that its former chief executive is to receive a "golden goodbye" worth £4m.
Mike Yardley quit Royal London, the UK's biggest mutual insurer, last September after 13 years at the helm. The annual report, posted on the company website at the weekend, shows Mr Yardley will receive the millions over the next three years as "incentive" schemes vest.
Asked why he would need to be incentivised now he has left, Royal London replied: "The performance-related awards reflect the strong operating performance of Royal London over a number of years. The long-term scheme, in particular, is designed to be well-aligned with the long-term interests of members and other policyholders. A substantial part of the performance-related awards were earned, and reported, in previous years but are only now becoming payable."
Royal London has been around more than 150 years, lately expanding with takeover of venerable insurance-industry names such as Scottish Life and Scottish Provident. It brags that since it has no shareholders, all profits are distributed to the more than four million members. At least some of those members are now likely to voice objections at the annual meeting in London next month .
The £4m for Mr Yardley is on top of the £1.1m he was paid for the nine months he worked last year. When he turns 60 in 2017, he will be eligible for a pension worth close to £450,000 a year.
Members may feel they have not done so well. Customers who paid £200 a month into a Royal London pension over the last 20 years will receive a pot of less than £90,000. At present annuity rates, that would buy an annual pension of £9,000 or less.
The annual report also reveals that new chief executive Phil Loney got a "golden hello" deal of £1.28m, supposedly in compensation for having left Lloyds Banking Group. The revelations come days after Barclays was rocked by a near-unprecedented revolt from investors over executive pay.
Royal London's remuneration committee is led by David Williams. The other members are Duncan Fergsuon, Robert Jeens, Tim Melville-Ross and Andrew Palmer. The committee took "advice" on pay from Kepler Associates, Pinsent Masons, Towers Watson and PriceWaterhouse Coopers, notes the annual report.
Ferguson, Jeens and Palmer are paid about £60,000 as non-executive directors. Chairman Tim Melville-Ross received £198,000. Royal London's own trade body, the Association of British Insurers, has lately been getting active on executive pay.
ABI boss Otto Thoresen says there needs to be "a clear alilgnment of boardroom reward with long-term sustainable growth of the economic value of the company".