Pressure sees Aviva chief give up pay increase

The move is a further sign of increasing shareholder power amid anger at fat cat pay increases at a time when the country is back in recession.

Chief executive Andrew Moss was awarded a 4.8 per cent pay rise in March on his £960,000 annual salary, but has decided not to accept the increase following talks with major investors.

Aviva said it will review how Aviva compensates future executives for the loss of pay and bonuses from their previous role.

Mr Moss’s decision to forego his salary, which was accepted by the board, comes after investor group Pensions Investment Research Consultants (Pirc) called on shareholders to vote against Aviva’s executive pay report at its annual meeting on Thursday.

Barclays was stung by its shareholders on Friday after nearly a third of their votes failed to back the bank’s pay awards.

Aviva said shareholders have expressed concerns about how it pays compensation when it recruits executives and whether pay packets reflect changes in shareholder value through the year.

Shares in Aviva, Britain’s biggest insurer, lost almost a quarter of their value last year, reflecting its exposure to troubled eurozone economies such as Italy and Spain. The fall compares with a five per cent fall in the FTSE Life Insurance index.

Scott Wheway, the chairman of Aviva’s remuneration committee, said: “We take the views of our shareholders very seriously.

“I am disappointed that we haven’t done that as well as we should have on this occasion.

“A number of shareholders have indicated that they would like to see a different approach to the way we compensate senior directors on recruitment and an even closer correlation between our pay packages and shareholder returns.

“Having listened to them, we have sought to address their concerns and will continue to engage with them on this matter.”

Aviva is the latest company to review executive pay in response to investor pressure.

Shareholders have been encouraged by a rising tide of pay revolts elsewhere, but analysts said discontent at Aviva is as much about long-term underperformance as short-term pay excess. Pirc, which urged its members to vote against Barclays’ remuneration report, dubbed Aviva’s executive pay awards “excessive”.

The Association of British Insurers has also issued an ‘amber alert’ warning over Aviva’s remuneration report.

Mr Moss was entitled to a total pay and perks package worth up to £5m last year if certain targets were met.

Aviva achieved record operating profits of £931m in its York-based UK life insurance division for 2011, with gains in its core markets of workplace savings, annuities and equity release products and protection.

In its general insurance business profits rose seven per cent to £520m after the roll-out of direct pricing to motor insurance brokers and the launch of its quotemehappy website.

Aviva said no other executives are expected to waive their salary increases.

The company does not disclose the pay of York-based UK life insurance chief executive David Barral as he is not on the board.

Earlier this month, Mr Barral was promoted to Aviva’s executive committee alongside the UK general insurance chief executive David McMillan and France chief executive Philippe Maso.

The move followed the removal of a layer of management with the axing of three senior executives under plans to “simplify and grow”.

The group said Europe chief executive Igal Mayer, North America chief executive Richard Hoskins and Aviva Investors chief executive Alain Dromer were leaving to create “shorter and more direct reporting lines”.

The group, which has around 4,500 Yorkshire employees, has its UK life and pension business based in York.

It has about 2,600 staff in York and 1,600 in Sheffield.

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