Bill Jamieson: Scottish corporate giant sets foul example on fat cat pay

The firm is the UK's second largest listed asset manager based on market cap. Picture: Graham FlackThe firm is the UK's second largest listed asset manager based on market cap. Picture: Graham Flack
The firm is the UK's second largest listed asset manager based on market cap. Picture: Graham Flack
Average FTSE 100 company CEO earns 145 times the average salary, up from 47 times in 1998, writes Bill Jamieson.

To the ever-rising pile of mind-blowing boardroom pay awards, the case of Stephanie Bruce, newly appointed chief financial officer of Standard Life Aberdeen, Scotland’s leading asset management company, might cause barely more than a fluttered eyebrow.

Her pay package – quite mundane in the greater scheme of things at SLA – includes a £525,000 base salary, almost 17 per cent more than her predecessor, and a £750,000 sign-on bonus.

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Barely out of the ordinary, perhaps, on the executive floors of Lothian Road – but of utter disbelief to Standard Life shareholders who have suffered a share collapse, a profits slump, underperforming funds, investor outflows of £57 billion and a wholesale drubbing for one of the most value-destroying mergers in the history of financial management industry.

Little wonder that 42 per cent of SLA’s shareholders voted against this relatively modest financial award to Ms Bruce, and concerns were raised by advisory firms such as Glass Lewis and Institutional Shareholder Services.

Why get angry? Why should such a rebellion matter? Since the vote was advisory – “indicative” you might say in Westminster parlance, with the directors free to ignore it – such a revolt would hardly seem to signify. And set against the £1,089,000 granted last year to each of the 2018 co-chief executives Keith Skeoch and Martin Gilbert, the package might seem suitably down the SLA pecking order – although fully in keeping with the shocking, bloated culture of the whole.

All told, executive director pay at SLA last year totalled £4.2 million – not including long-term bonuses in the form of shares. Add to this the £900,000 given to the non-executive directors and the £400,000 fee to chairman Gerry Grimstone, and the grand total for the board comes to £5.5 million.

It is tempting at this point to throw one’s hands up in despair. So many are the instances of runaway boardroom pay, so colossal the awards to the top brass, so relentless the instances, that to express questioning or even outright opposition seems pointless. The dogs bark – and the caravan moves on.

But in this case, bark we must. For SLA has inflicted on its investors an appalling set of results for which no contrition has been offered, still less apology. Assets under management – a key measure for a business whose raison d’etre is the care and custodianship of the savings of millions – slumped last year from £608 billion to £551 billion although they have picked up since the year end. Outflows – investors pulling their savings out of the group’s funds and trusts – jumped from £32.9 billion to £40.9 billion. Losses before tax from continuing operations hit £787 million.

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Assets on the rise at Standard Life Aberdeen

Arguably most damning of all, the percentage of assets under management performing above benchmark over three years fell from 63 per cent to 50 per cent. Put another way, investors would have been just as well off opting for a low-cost index-tracker fund without a management superstructure resembling that of an ocean-going liner. If this is the reward for corporate value destruction, we can only wonder what on earth the rewards for success might be like.

The 2018 group accounts can fairly be viewed as a statement of group priorities. ‘Risk management’ runs to eight pages, the directors’ report to six pages, the chief financial officer’s overview to ten pages. But the report on directors’ remuneration is a runaway 21 pages. Much of this is required by regulation. But such is its daunting length, packed with tables, charts and the most obfuscatory language imaginable – “client centricity”; “enhancing opportunities”, “valuing our savings eco-system”, it is virtually beyond comprehension for lay people.

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Here seems a total disconnect between these appalling performance figures and the runaway gravy train that life at SLA HQ has become. Here is a corporate giant at the heart of Scotland’s financial centre that is not just setting a foul example but indicative of a company that, while preening itself on corporate governance, has seriously lost the plot. For a business founded on savings and thrift, it could hardly set a worse example.

That it is not alone is hardly an excuse. It adds to a growing lack of trust in corporate Britain and wider concerns on income inequality, acutely set out in a report this week from the Institute of Fiscal Studies. The average chief executive of a FTSE 100 company is now earning 145 times the average salary, up from 47 times in 1998. SLA may think it can hide in this jungle of greed. But it makes for no less of a scandal – and one that deserves to be called out.

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