Standard Life attacks bosses' pay bonanzas: 'Increasingly concerned' investment institution warns it will take a harder line on salary increases

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The Independent Online
STANDARD Life, one of Britain's biggest shareowners, has added its weight to the growing campaign against large pay awards being granted to some top businessmen - one of the first investors to take such a public stance.

John Thomson, a senior investment manager, said Standard Life was becoming increasingly concerned about the large salary increases being paid by some companies and was considering taking a harder line with those in which it held shares. It might also approach other institutional investors with the aim of mounting a co-ordinated campaign on salaries.

Standard would like to see greater disclosure of the basis on which pay awards are made, and is against excessively long service contracts for directors. Mr Thomson said he did not object to high salaries, if they were justified, nor to performance-related bonus schemes, provided they meant that directors' pay could fall as well as rise.

Although Standard is one of few institutions to express publicly its concern about boardroom salaries, there is growing anxiety, usually expressed in private, among other institutional investors. This mirrors the US, where pay and other perks such as share option schemes - which have made some directors multi-millionaires - have become an important issue at company meetings.

Their concern follows a series of highly publicised pay increases to existing directors and compensation payments to former directors, many of whom have been ousted because their companies underperformed.

The Institute of Management estimates that directors of companies with annual sales of more than pounds 600m enjoyed average salary increases of more than 40 per cent over the past three years.

One fund manager, who preferred not to be named, said he was more concerned about large pay-offs to former executives than salary increases. He pointed to Chris Greentree, who received a pounds 1.2m pay-off after being replaced as chief executive of Lasmo at the beginning of the year, and Robert Horton, who was paid pounds 1.5m after being ousted as BP chairman last summer, as particularly unacceptable.

Another large investor said he was raising the question of remuneration more frequently with companies his firm invested in. The Cadbury Committee's report on corporate governance recommends that all companies have remuneration committees, staffed by independent directors, and that service contracts should not exceed three years.

But one fund manager pointed out that remuneration committees were often staffed by non-executive directors who were executives at other companies where they were given generous pay rises. He cited Sir Anthony Tennant's pounds 500,000-a-year pension from Guinness - decided by a remuneration committee that includes Sir Ian McLaurin, who earned pounds 967,000 from Tesco - as an example.

Frank Barlow, managing director of Pearson, is on a 4 1/2 -year service contract, according to documents available for inspection ahead of the conglomerate's annual meeting. The contract was agreed in August 1990, long before the publication of the Cadbury Committee's report. The other Pearson executive directors are all on three-year contracts.

Mr Barlow's basic pay was raised last year from pounds 202,000 to pounds 275,000. Lord Blakenham, chairman, had his basic pay lifted from pounds 236,000 in 1991 to pounds 246,000 in 1992, according to his service contract.

The figures do not include bonuses nor benefits in kind like company cars. Including these, Lord Blakenham's total remuneration was pounds 299,000, according to the annual report. His bonus was pounds 20,000.

The service contracts show the basic pay of David Veit, head of US operations, rising from dollars 420,000 to dollars 433,000; James Joll, finance director, from pounds 191,000 to pounds 197,000; and Mark Burrell, development director, from pounds 174,000 to pounds 180,000.

The directors in total received bonuses of pounds 55,000 in 1992. In that year Pearson's earnings per share fell from 24.7p to 19.3p. The Pearson remuneration committee is headed by Sir Simon Hornby, chairman of WH Smith.

----------------------------------------------------------------- SOME RECENT EXIT PAYMENTS ----------------------------------------------------------------- Company Director Title Cash Aegis Peter Scott CE pounds 2.2m Amber Day Philip Green Ch/CE pounds 1.13m Ashley Tony Butler CE pounds 600,000 BP Robert Horton Ch pounds 1.5m Burton Lawrence Cooklin CE pounds 773,000 Lasmo Christopher Greentree CE pounds 2.2m Standard Chartered Rodney Glapin Ch pounds 350,000 TSB Don McCrickard ce pounds 763,000 -----------------------------------------------------------------