Oil and gas explorer BG Group has moved to avoid a shareholder revolt over a £15 million “golden hello” for its new boss by unveiling a revised package in the face of growing opposition.
The group has cancelled an initial shares award for former Statoil chief executive Helge Lund, worth up to £12 million, and replaced it with an award worth up to £10.6m under a separate long-term bonus plan with more stringent performance criteria.
BG said it would mean the expected initial value on award of this part of the “golden hello” is cut from around £10m to £4.7m. It also means there will be no need for a planned shareholder vote set for 15 December, as the changes mean the award falls within the remuneration policy approved earlier this year.
However, the total “golden hello” for Lund – including a one-off £480,000 relocation package and shares worth up to £3m to compensate for unvested bonuses – will still amount to a maximum of around £14m.
Lund will also still receive an annual package of up to £14m a year, including an annual salary of £1.5m plus payment in lieu of pensions, annual bonus, and a yearly long-term share award.
The changes come after a chorus of discontent from investment advisory bodies over the initial package, with the Institute of Directors saying it “brings the whole of British business into disrepute”.
IoD director-general Simon Walker welcomed yesterday’s change of heart, adding: “Mr Lund’s pay now conforms with the policy guidelines agreed by shareholders in May and is subject to quantifiable performance targets.
“While substantial, the total remuneration is reduced and now falls within proper limits for a company of BG’s size and international importance.”
Lund is due to take over as BG chief executive in March after ten years running Norwegian energy giant Statoil.
BG said: “Mr Lund is an exceptional candidate, with the necessary skills and experience to lead BG Group and it is clear from the extensive consultation with shareholders over the past few weeks that this view is widely shared.
“However, a significant number of shareholders questioned the structure of the package, in particular whether it was appropriate to go outside the remuneration policy approved by shareholders earlier this year.”
It said the board and Lund wanted “to respond to shareholder concerns”. He has waived his right not to join the company should the initially-planned share award not be voted through.
Alastair McCaig, market analyst at IG, said: “Chief executive pay has become an increasingly emotive issue with FTSE firms, but getting the best person running a business can sometimes prove prudent business, especially if the company has as many issues as BG Group does.”
Previous chief executive Chris Finlayson quit in April, just 18 months into the job. His departure came in the wake of production targets being slashed due to continued problems in Egypt. In October, BG reported a 29 per cent fall in third-quarter earnings to $759m (£482.6m).
SUBSCRIBE TO THE SCOTSMAN’S BUSINESS BRIEFING