The day after Vince Cable, the Business Secretary, announced extra legislation to control fat-cat pay and bonuses, a major blue-chip company, Cairn Energy, has bowed to shareholder pressure over a massive one-off payout for its chairman.
Sir Bill Gammell had been due to receive a £2.5m share bonus, with another £1m being donated to charity as a result of the successful £3.5bn sale of the group's Indian business to Vedanta last year. But yesterday Cairn bowed to investor pressure and said it had withdrawn the plans from the agenda of its shareholder meeting next week. That means neither will be paid, at least for the time being.
City experts said the backdown showed that companies and investors can resolve pay issues without the need for further legislation.
The Association of British Insurers, which had issued a "red top" notice flagging up its concerns about the Sir Bill bonus, said: "We are pleased that the company has listened to the concerns of its shareholders."
Cairn said that the head of its remuneration committee, Jim Buckee, had met several of the group's biggest shareholders and "listened to their concerns". It told the stock market: "In the light of those comments and as recommended by the remuneration committee of the company, the board has determined that it will withdraw resolution 2, which proposed approval of the share award, from consideration at the general meeting ... and consult further with shareholders on the matter."
Sir Bill, a former Scottish rugby international, had asked for the £1m to be donated to his Winning Scotland Foundation, which promotes youth participation in sport.
The ABI had welcomed Mr Cable's plans to make pay and bonus disclosures more transparent, saying they "will help shareholders establish stronger links between pay and performance and tackle excessive pay for failure". But Mr Cable was criticised in some quarters for backing off more radical proposals such as putting workers on remuneration committees and forcing companies to publish ratios between executives' and their lowest-paid workers' pay.
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