Shareholders balk at directors' windfall

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The Independent Online
Leading shareholders in Grand Metropolitan are upset that top executives are set to reap millions of pounds in profits on options as a result of the proposed pounds 23bn merger with Guinness.

The company confirmed that bonus payments linked to options would become payable but refused to comment on reports that 19 executives, some below board level, will share pounds 19m.

The merger, and the sharp jump in the Grand Met share price, is also likely to guarantee that Lord Sheppard will collect more than pounds 2m in profits, although he retired as chairman in February 1996.

The bonus payments were devised to reward long-term performance and in most cases would have been triggered only if Grand Met shares had outperformed the FT-SE 100 index. Shares in the company have performed poorly in recent years even taking into account last week's merger-inspired rise to 564p.

In the last two financial years, Grand Met directors failed to meet the share price performance target and no payments were made under a 1993 version of a so-called "phantom share option scheme". Ironically shareholders voted at last week's annual meeting to scrap this and all other existing option schemes and put in a different share bonus plan.

"We think that such payments should be earned rather than fall out of the sky," said Graham Wood, investment manager at Standard Life, which owns 1.9 per cent of Grand Met and 1.1 per cent of Guinness.

"Generally we try to convince companies that these payments should flow from improving the underlying performance of the company rather than solely from a change of control."

If the merger goes ahead, George Bull, currently Grand Met chairman, will collect around pounds 1.3m - based on today's share price - by exercising options that would not have had much value had it not been for the merger. Chief executive John McGrath, who will run the merged GMG Brands Group, would pick up pounds 1.2m.

Even Gerald Corbett, Grand Met's finance director, stands to collect nearly pounds 600,000. Around one third of this arises from a plan originally designed so that top executives would "align their long-term career aspirations with the long-term interests of the group".

Mr Corbett will lose his job if the merger goes ahead.