NAPF turns its guns on ICI and Rolls-Royce directors

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Shareholders in ICI, the troubled chemicals group, are being advised to withhold support on directors' pay at this Thursday's annual general meeting. It is the first time that the National Association of Pension Funds, a shareholder organisation, has not fully supported the company's policies at the yearly meeting.

ICI has struggled after its March profits warning, when it admitted problems in its scent division Quest and high raw material costs at its Natural Starch business, which makes products for hairspray and adhesives.

However, last year it raised the bonuses executives can receive without explanation, a move criticised by the NAPF. Although ICI's shares fell 31 per cent in 2002, directors' pay rose 17 per cent to £3.7m. Brendan O'Neill, the chief executive, who resigned shortly after the profits warning, saw his pay increase 30 per cent to £1m in his final year.

The shareholder organisation, representing investors holding around £700m of investments, is concerned that some of the targets executives must meet to be rewarded are not disclosed. "UK institutional investors generally consider that such information is an essential part of a remuneration report," said the NAPF's advice. "It is also important because awards under [this] section of the [pay deal] can be very significant."

The NAPF is not opposing the re-election of ICI's directors. It said ICI's reasons for giving specific awards were more detailed than those of most companies.

By contrast, the NAPF is not supporting the re-election of a non-executive, Sir Robin Nicholson, at Rolls-Royce. A director for 17 years, he is deemed too close to management. Sir Robin sits on the remuneration committee, which decides the level of executive pay at Rolls-Royce. It awarded directors a total pay package of £5.7m in 2002, up 8 per cent on 2001.

The general rise in directors' pay as shares fall has been strongly criticised recently.

Tomorrow, the drugs giant GlaxoSmithKline is expecting a shareholder rebellion. Most UK investors intend to vote against its remuneration package, as they are concerned about a deal that could give chief executive Jean-Pierre Garnier £23m if he is forced out. However, in the US, investors may be more supportive. Glaxo's pay in 2002 fell 26 per cent to £4.5m, as the industry had a difficult year.