Keeping up the pressure on 'rewards for failure'

May 23 2005 by Brian Amble Print This Article

Shareholder advisory group Pensions Investment Research Consultants (PIRC) is upping the ante against so-called 'rewards for failure' after advising shareholders in three of Britain's leading companies to vote against their remuneration reports in protest against pay-offs to directors.

PIRC has advised the actions against GlaxoSmithKline, broadcaster ITV and insurer Royal & SunAlliance because executives in all three still stand to receive large golden goodbye payments if they quit or are replaced before their contracts end.

"Preventing reward for failure is a buzz corporate governance terms, and we fail to see how paying someone unearned bonuses when they leave is in keeping with that aim," PIRC analyst David Somerlinck told the Mail on Sunday.

Last year GlaxoSmithKline shareholders voted down the company's remuneration report in protest at the potential £22m pay-off chief executive Jean-Pierre Garnier stood to make if he left his job early.

PIRC claims his total pay package is still excessive because he could receive up between £7m and £16.7m - 20 times his salary - if he meets 'performance targets'.

But GlaxoSmithKline disputers the figures, saying that his total pay in 2004, including salary, bonus and benefits, was only £2.5m

A repeat of last year's fiasco appears unlikely, however, since both the National Association of Pension Funds and the Association of British Insurers, whose members control some 40 percent of investments in the London stock market, have both said that they will recommend shareholders support Garnier's current pay arrangements.