Boardroom pay under fire

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BOARDROOM pay deals at three leading Yorkshire plcs have been criticised by influential shareholder advisory group PIRC as a debate rages over corporate governance.

Remuneration at York-based housebuilder Persimmon was “excessive” in 2011, according to PIRC (Pensions Investment Research Consultants), after chief executive Mike Farley earned a £1.9m total pay and bonus deal. PIRC also labelled combined bonuses at natural chemicals group Croda as “excessive” in 2011.

The advisory body also questioned contracts at Saltaire-based set-top box maker Pace, where former chief executive Neil Gaydon was handed a $914,000 (£574,000) payoff.

PIRC has advised investors such as pension funds and insurers to oppose the three companies’ remuneration reports at their upcoming annual general meetings.

Business Secretary Vince Cable recently announced measures to improve executive pay policy at Britain’s biggest companies, after uproar over perceived rewards for failure.

Shareholders should be given a binding vote over how large companies manage executive pay and firms should be able to claw back cash from highly-paid staff who fail to deliver, he proposed.

Recently published annual reports from six Yorkshire plcs – Persimmon, Croda, Pace, Drax, Provident Financial and International Personal Finance – show big companies are increasingly influenced by wider concerns over corporate pay in deciding remuneration.

Power station operator Drax’s chief executive Dorothy Thompson’s total remuneration increased to £1.2m from £1.16m in 2010.

Bradford-based doorstep lender Provident Financial raised CEO Peter Crook’s total pay and benefits from £1.3m in 2010 to £1.5m in 2011, or £1.6m once higher pension values were included.

John Harnett, former CEO at emerging markets lender International Personal Finance, saw his total remuneration increase to £825,000 in 2011 from £588,000 in 2010.

Pace, still reeling from three profits warnings, said directors’ salaries will not go up in 2012, in line with flat group staff pay.

Its report reveals Mr Gaydon received a total $1.7m in 2011 when his payoff was combined with an $803,000 salary.

But Pace said “having regard to the performance of the business during the period”, neither its former CEO, finance director or chief operating officer, earned a bonus. Pace’s new chief executive Mike Pulli is on a $750,000 salary and new finance director Roddy Murray’s salary is $503,750.

PIRC said: “Contracts are of concern given the termination payments made to outgoing CEO Neil Gaydon during the year and the appointment share award granted to the incoming chairman Allan Leighton.”

It said the shares handed to former Asda CEO Mr Leighton on appointment were “not appropriate”.

Pace declined to comment.

Persimmon’s annual report showed chief executive Mike Farley’s total pay and benefits package increased to almost £1.9m in 2011 from £1.5m in 2010.

That included a £659,000 salary and bonus of the same amount, after a year when Persimmon’s pre-tax profits rose 55 per cent to £148m.

Total boardroom remuneration at the housebuilder was £4.3m in 2011, up from £3.4m in 2010.

PIRC said: “Combined remuneration was excessive in the year under review.

“Average salaries are at the bottom of the sector.

“Maximum potential remuneration has increased to 400 per cent which is potentially excessive.”

For 2012, the York-based housebuilder awarded Mr Farley and finance director Mike Killoran three per cent salary increases.

A spokesman for the housebuilder said: “Persimmon’s remuneration policy is structured to ensure that there is a strong link between executive pay and performance.”

Goole-based chemicals firm Croda’s annual report reveals former chief executive Mike Humphrey earned a total remuneration package of £1.3m, up from £1.26m in 2010. Combined bonuses for Croda executives hit £1.2m.

Croda, which recently joined the FTSE 100 index of leading UK companies, said new CEO Steve Foots will receive a basic salary of £500,000.

Salaries across the group will increase by three per cent.

PIRC said: “Combined (incentive) awards are potentially excessive in our view and are considered so during the year.” But it added incentives are modest in comparison with other FTSE 100 firms.

Croda declined to comment.

Selby-based power station operation Drax said it “welcomed” the debate around executive pay. “We recognise the need to build trust in the remuneration process through transparency and accountability.”

However, PIRC suggested abstention from Drax’s remuneration vote and said while executive salaries are relatively low “maximum awards for total remuneration are potentially excessive”.

PIRC has yet to publish reports on Provident Financial and Leeds-based International Personal Finance. Shareholders voted down Provident’s pay report in 2009.

Croda, Provident Financial and Persimmon introduced clawback provisions, which allow bonuses to be taken back in future, according to their annual reports.

Blackfriar: Page 3.