Investor anger as Royal & SunAlliance reworks executive bonus scheme

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The Independent Online

Royal & Sunalliance, Britain's third-largest insurer, is reworking its executive bonus scheme after its directors missed the criteria needed for payouts for the past three years.

A company spokesman denied the performance hurdles of the scheme were being lowered. However , the new incentive plan will see bonuses measured against longer time horizons and the rewards too will be spread more evenly from year to year.

Bob Mendelsohn, who has been chief executive of RSA since 1998, has yet to receive a bonus after RSA failed to meet the targets he set on underwriting profitability or share price performance. Last week RSA warned its 2001 profits had been completely wiped out by massive provisions against asbestos claims.

RSA has put the new executive plan before the Association of British Insurers, which has a special panel that provides confidential feedback on proposed schemes and advice on whether they adhere to industry best practice. The company is now in dialogue with the ABI over the awards.

If RSA decides to go ahead with a new performance-related scheme, it will send details of the plan to shareholders in the next few weeks and it would be put to a vote at the annual general meeting in May.

However, the move is already proving controversial. One unidentified RSA shareholder was quoted over the weekend as saying "This is outrageous. The board is moving the goalposts." Another said: "As a matter of principle it is wrong that executives are not made to suffer for underperformance along with other shareholders."

RSA has decided the existing directors' incentives were too short term. The new bonus arrangements would be based on achieving consistency of performance and reward, with good years not necessarily leading to a payout. Equally, poor years may still see a bonus awarded.

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