Schroders pay deal prompts City row

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The fund management group Schroders strolled into another corporate governance row yesterday after disclosing that its new chief executive would enjoy a guaranteed package worth £10.5m over three years, and would receive at least £3.5m if he was sacked.

The Association of British Insurers voiced concerns over Michael Dobson's contract, which comprises £200,000 in basic salary and a £3.3m guaranteed bonus, of which £1.8m is cash, annually until 2004. Shares worth £3.75m are due if Schroders' share price doubles in five years. Peter Montagnon, the ABI's director of investment issues, said: "There are some concerns. We are going to seek more explanation."

David Rough, director of investment at Legal & General said the award "drove a coach and horses" through the industry's role in policing boardroom pay. "Platinum finger, diamond finger, it's hard to know what to call [Mr Dobson]. A sensible package has a small fixed element with the bulk in performance-related pay. Schroders has turned that upside down."

Peter Sedgwick, Schroders' chairman, said the company still felt comfortable speaking out against any questionable corporate governance in the companies in which it invests. "There are other asset management firms that pay executives much more," he said.

Schroders is also buying Mr Dobson's start-up asset management business, Beaumont Capital Management, for £33.5m. Since the deal was agreed last month, Beaumont has lost a mandate worth $36m (£24.8m), taking funds under management down 13 per cent to $239m.