Tomkins, the engineering company that ousted its chief executive Greg Hutchings 16 months ago after a scandal over "corporate excesses", yesterday hired a replacement on a three-year package potentially worth £36m.
The deal offered to Jim Nicol, a 47-year-old Canadian businessman, clearly breaches boardroom pay guidelines set down by the bodies representing UK institutional investors. But David Newlands, Tomkins' chairman, served notice that the company would ignore protests from shareholders in this country.
"I recognise that this is a lot of money but it is the minimum we had to pay to entice him to come," Mr Newlands said. "When you look around the UK there is not exactly a plethora of executives who would be capable of running this company."
Mr Newlands said he appreciated that the terms of Mr Nicol's package did not conform with the guidelines laid down by the Association of British Insurers and the National Association of Pension Funds. "I fully respect their guidelines but they are only guidelines and we as a board have to do what is right for the company," he said.
Mr Nicol, who was president and chief operating officer of the Canadian car components firm Magna International until last month, will join Tomkins next week. He will be paid an annual salary of £750,000 plus an annual bonus of up to £750,000. In addition, he will be eligible for free matching shares worth a minimum of £2m and a maximum of £18m, depending on the company's performance.
Other elements of the package include share options with a face value of four times salary and a one-off grant of 5 million options exercisable at various prices. Finally, Mr Nicol will receive extra cash payments of £840,000 spread over three years.
Mr Newlands justified the pay package on the grounds that it is less than Mr Nicol was receiving in his previous job. He also said the appointment had received the backing of Tomkins' biggest shareholder, the Gates family of the US, which owns a 22 per cent stake. Mr Newlands said that he had spoken to Tomkins' two biggest UK shareholders about Mr Nicol's pay but had not been in contact with either the ABI or the NAPF.
Mr Nicol, who is Scottish by ancestry, has agreed to relocate from Ontario to Putney in south-west London, where Tomkins has its headquarters, for two years. But after that, he might decide to carry out the job from North America where the bulk of Tomkins' sales and manufacturing operations are, along with 40 per cent of its shareholders.
In return for buying £2m worth of Tomkins shares, Mr Nicol is guaranteed at least the same number of free shares and a maximum of three times the number if the share price trebles.
In order for the executive share options to become exercisable, Tomkins' earnings per share will have to rise by 9 per cent in real terms over three years. But there are no performance conditions attached to the 5 million additional options.
Mr Newlands said: "There will have to be massive outperformance for him to get the sort of sums being bandied about. Compare that with North America where pay packages are legally watertight and share options have no performance conditions attached."
Mr Nicol's £36m package compares with the £9m being paid to Ben Verwaayen, the new chief executive of BT, a company 15 times the size of Tomkins.