‘Massive’ vote against Cairn Energy board as shareholders rebel

The Scottish oil explorer became the fourth UK listed company to see its remuneration report defeated this AGM season.

Chairman Sir Bill Gammell, who was praised by chief executive Simon Thomson for “inspirational leadership” of the company he founded two decades ago, saw his re-election opposed by 10.9 per cent of shareholders at yesterday’s meeting in Edinburgh.

Fairpensions, a charitable group which seeks to influence investors on issues over pay, said a £1.4m termination payment for Gammell, who became chairman after giving up his role as chief executive last year, was a “key issue”.

This was despite Gammell having waived a controversial £2.5m bonus award following the sale of a majority stake in its Indian operations last year, and a subsequent $3.5 billion (£2.2bn) payback to shareholders.

But the board yesterday indicated it had no intention of relenting on its pay package plans beyond moves made two months ago to add a corporate governance function to its nomination committee.

Both the nomination and remuneration committees will be chaired by non-executive director Jackie Sheppard, who took over from fellow non-executive Dr James Buckee.

The board withdrew the proposed award in January, which would have seen an additional £1m handed to charities of Gammell’s choice, after shareholders strongly refused in consultations with the board.

The new combined nomination and corporate governance committee met days before yesterday’s AGM.

Sheppard said: “We have taken on board and acknowledge the way shareholders have cast their proxy votes on remuneration.

“We have listened to shareholders’ concerns, having had extensive dialogue with investors in recent weeks. Cairn has learned from the recent consultation and is committed to listening closely to shareholders views on governance.”

Gammell, who chaired yesterday’s subdued meeting, told assembled shareholders that there had been a “large” vote against the remuneration report. While it has become commonplace for results of votes to be shown to investors at the meeting, the company did not display final votes but posted them later through the London Stock Exchange.

Gammell said: “The board and I fully acknowledge the strength of the views expressed by our shareholders in some of their voting today.

“Cairn endeavours to meet the highest corporate governance standards and is conscious of its responsibility to ensure best practice and continue an open dialogue with its shareholders at all times.”

The remuneration report received a 33 per cent share of the vote in support, a further 1 per cent of shareholders withheld their votes.

Matthew Butcher, a spokesman for Fairpensions, said the so-called “shareholder spring” would see the Business Secretary Vince Cable put a requirement that shareholder votes be binding into the upcoming Enterprise Bill.

“It is very likely that a binding vote on pay is going to happen. It is important to give shareholders more power,” he said.

Cairn also revealed it has struck an agreement with oil giant Marathon to jointly bid for exploration rights in Cyprus.

The bid, which also includes junior partners CC Energy SAL and Oranje-Nassau Energie, was submitted bids on 11 May, with a decision by Cyprus’s ministry of commerce, industry and tourism expected later this year.