Kingfisher makes concessions to avert showdown over pay

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The Independent Online

The campaign against excessive boardroom pay yesterday scored another victory when Kingfisher, which owns Comet and B&Q, said it had scrapped controversial two-year contracts for three of its directors. The retail giant has also beefed up the criteria which trigger the lucrative share option scheme given to Gerry Murphy, the new chief executive.

The climb-down will hearten corporate governance campaigners as they prepare for another week of angry clashes between boards and shareholders over lavish executive pay and perks. The culmination will be the annual general meeting of HSBC on Friday where the bank is likely to be grilled over the $37.5m (£25m) three-year deal granted to William Aldinger, head of the recently acquired Household International.

Kingfisher unveiled its revised plan in a letter to shareholders last Thursday. It hopes the new arrangements will head off a repeat of the vicious attacks on executive pay which have dominated other companies' annual meetings with shareholders. The Kingfisher agm is a week on Wednesday.

A recent series of introductory meetings with Kingfisher's largest shareholders left Mr Murphy in no doubt that two-year contracts are becoming increasingly unpopular in the City. Investors also warned him they were opposed to using ambiguous "rolling periods" for assessing share price performance when setting bonuses.

As a consequence, the company has sliced in half the two-year notice period of its finance director, Helen Weir, and two other executive directors, Ian Cheshire and Bill Whiting.

Severance terms which award a director more than 12-months' money - known as "golden goodbyes" - are one of the main focuses of discontent among shareholders because they could be a huge "payment for failure".

Mr Murphy, who joined in February from Carlton Communications, has also agreed to base his pay-out from share options on Kingfisher's share price from when he joined. This is more rigorous than the original arrangement, which entitled Mr Murphy to pick any three-year period.

Corporate governance lobbyists fear that companies which bow to this year's unprecedented backlash against "fat cat" rewards will quietly compensate their senior executives in other ways.

However, Kingfisher confirmed that Mr Murphy, who is on a basic salary of £800,000 plus up to £1.6m in annual bonuses, would not be compensated for strengthening the performance criteria of his share options. Nor would the three executive directors be compensated for moving to one-year contracts.

Kingfisher's climb-down comes less than a month after it provoked the wrath of shareholders with news that its former chief executive, Sir Geoff Mulcahy, had amassed a £15m pension pot.

GlaxoSmithKline became the most high-profile victim of shareholder activism so far when it suffered a landmark defeat at its agm over the pay packet of its chief executive, Jean-Pierre Garnier.

This week, Rolls Royce, Collins Stewart, Rentokil Initial, Aegis and HSBC are facing a showdown with shareholders. Tomorrow Vodafone is expected to say Sir Christopher Gent, its chief executive, who is retiring in the summer, was paid £5m for his last full year. Vodafone, still one of the most generous payers in the FTSE 100, was one of the first major UK companies to bow to pressure on executive pay. It has put its remuneration report to the vote for the past three years and required Sir Christopher to take a large chunk of a £10m bonus in shares.

Separately, a study published yesterday showed that nearly one-fifth of FTSE 100 bosses would receive pay-offs worth more than their annual remuneration if they lost their jobs.

The survey, by Manifest and The Independent on Sunday, showed that Michael Dobson at Schroders, Matt Barrett at Barclays and Sir Terry Leahy at Tesco would be in line for some of the biggest golden goodbyes.

THIS WEEK'S FAT CAT ROWS

William Aldinger of HSBC

The bank is set for a rough ride over the $37.5m (£25m) three-year package awarded to Mr Aldinger, head of its US division Household International, including free medical and dental care for life for Mr Aldinger and his wife.

Mr Flynn, chief executive, faces opposition over his two-year contract which would mean he takes away about £1.5m if he is ousted from the advertising group.

The National Association of Pension Funds opposes the remuneration report of the stockbroker run by Terry Smith over concerns its share options scheme is not stretching enough.

Sir Robin Nicholson, a non-executive for 17 years, faces opposition due to concerns he is no longer independent, though the group also has a £1.1bn pensions black hole.

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