Standard Life's bonuses attacked by shareholders

Standard Life yesterday fought off criticism of excessive bonuses paid to its directors at a heated annual meeting that lasted almost three hours.

The insurer was forced onto the defensive by irate policyholders who attacked the scale of bonus payments made to the board in a year that they saw their own returns fall by an average 15 per cent.

John Trott, the outgoing chairman, said the company needed to pay attractive packages to retain good staff. "We believe as a matter of principle we should pay bonuses for success and not mediocrity," he told the assembled crowd of some 400 policyholders.

Standard's performance was under the spotlight after it racked up losses of £4.7bn on the stock market last year, forcing it to slash payouts for with-profits policyholders on three occasions while awarding its directors bonuses worth £1.5m.

The board spent about 90 minutes answering more than 30 questions from policyholders on issues ranging from executive pay and demutualisation to why the insurer's investments were so heavily weighted in equities rather than bonds.

The group's executives stood accused of "complacency and arrogance" by one policyholder, who even compared the society's performance to that of Equitable Life, the stricken life insurer.

Iain Lumsden, its chief executive, admitted that Standard's greater exposure to the stock market "has caused us to underperform our competitors" over the past two years. But he added that the society's performance had been "above average" over the past five years. "Whatever happens to share prices, members must expect that terminal bonuses and payouts will be at lower levels in future, simply because interest rates are historically low," he said.

Ronnie Sloan, a retired actuary, said: "The board gave a reasonable account of themselves but never really addressed any of the hard questions. The feeling of overcosiness and complacency still seems to persist."

Mr Lumsden also defended Standard's status as a mutually owned society, telling investors that only as a mutual could it "provide better value to our with-profit policyholders".

David Stonebanks, a retired lecturer, is leading calls for demutalisation although he must wait until July to requisition a meeting on the subject.

Reporting on current trading, Mr Lumsden said life and pensions sales in the UK, its biggest market, "were less buoyant" so far this year against last year.