Ousted RSA chief gets £1.4m pay-off

Bob Mendelsohn, the chief executive who presided over a dramatic collapse in the share price of Royal & SunAlliance, was paid £2.5m for the year that ended in his dismissal.

Yesterday, it was revealed that Mr Mendelsohn was paid £1.4m in compensation for loss of office, on top of £600,000 in salary, and £416,000 in housing and car allowances. He also received a pension of £325,543 a year. Even after being sacked, he received £32,552 for accommodation in central London and a car before returning to his US homeland, the insurer's annual report and accounts said.

The size of Mr Mendelsohn's pay-off was down to his two-year rolling contract. But the UK Shareholders' Association called the pay-off "little more than legalised theft among big business". "This highlights the danger of two-year contracts, which go against the industry norm," a spokesman for the National Association of Pension Funds said. "This is £1.4m of shareholder money that has disappeared."

RSA's board ousted Mr Mendelsohn, who ran the insurer for four years, in September after the company revealed record losses and a £600m capital shortfall. Sir Patrick Gillam, the former chairman of RSA, told shareholders yesterday that "Bob Mendelsohn set a firm business direction and did much to drive change". Sir Patrick earned £175,000 from the company last year. During Mr Mendelsohn's tenure RSA's share price declined from more than 300p to little more than 100p. The company last month slashed its dividend by 60 per cent, and fell out of the FTSE 100 index.

Paul Spencer, the chief executive of the UK business who also left last year, was paid £922,000, including a £608,000 pay-off for leaving the group.

RSA's new chief executive, Andy Haste, is employed on a one-year contract. He has already received a bumper crop of share options that breaks the group's normal limits.