Comment: Trebles all round for bosses defying austerity
Drugs company Shire is paying chief executive Angus Russell £8 million, even though profits fell. His package dwarfs the sum paid to Sir Andrew Witty at GlaxoSmithKline, which is a considerably bigger company.
Prudential is expected to be at the centre of controversy this week when it confirms that it will pay its boss Tidjane Thiam £7m, including a full bonus, against the wishes of some investors. It comes a week after he was censured by the City regulator over the mishandled bid for Asian rival AIA three years ago. The insurer was handed a £30m fine by the Financial Services Authority for failing to keep it informed of the bid.
Institutional shareholders have promised to continue, and step up last year’s so-called Shareholder Spring in response to controversial pay awards.
Protest votes from big investors saw a number of leading executives fall on their swords over pay, including Aviva boss Andrew Moss, Trinity Mirror’s Sly Bailey and AstraZeneca chief David Brennan.
Earlier this month, the National Association of Pension Funds, whose members manage assets of around £900 billion, called for caps on remuneration in line with inflation and argued that executive pay should be kept in line with the rest of the workforce – “or have a good explanation ready”.
However, these latest cases show that the gravy train is still running at full steam.
New watchdogs must have teeth
A NEW era in the regulation of financial markets kicks off tomorrow and, as my colleague Martin Flanagan explains on this page, a new get-tough approach will replace the much-maligned Financial Services Authority (FSA), whose light-touch policy contributed to its undoing.
The new structure will take some getting used to, but essentially the Financial Conduct Authority will look after consumers’ interests while the Prudential Regulation Authority keeps an eye on the financial stability of banks, building societies and insurers.
A third, more overarching arm – the Financial Policy Committee – has a more systemic remit and last week ordered the banks to raise a further £25 billion in capital.
The changes will put the Bank of England back at the centre of supervision and should at least help reconnect it properly with the system.
All we need is an assurance that the new system will be more effective than the one it replaces.
The FSA’s poor record of spotting the growing crisis in the banking system, its failure to stem a series of mis-selling scandals and its inadequate initial disclosures over the collapse of the Royal Bank of Scotland left it fully exposed to criticism.
No regulatory structure is foolproof, but a worry about the new arrangement is that there are bound to be grey areas and scope for buck-passing.
It surely won’t be long before something slips through the net because one regulator thought the other was dealing with it.
Already the incoming chief executive of the FCA, Martin Wheatley, currently managing director of the FSA, has been rebuked by Andrew Tyrie, chairman of the Treasury Select Committee.
Tyrie accused him of falling short in his dealings with the concerns of customers of Bank of Ireland.
It was not the ideal way to prepare for a new job, nor did it help instil confidence in the new regime and the man at its helm.
Wheatley, however, has talked tough, certainly enough to have irritated the banks. Armed with a new set of powers, including the ability to advise institutions to change their ways, he should be able to wield more influence than those who have gone before him.
Phone’s ringing endorsements
A SURPRISINGLY good set of figures from mobile firm BlackBerry suggests that the new Z10 device could prove its saviour.
But just as it looks to be winning back customers from Apple and Samsung, it faces a potential new challenge. Facebook is expected to unveil a smartphone this week, possibly in conjunction with Taiwan’s HTC.
The two have worked together before, although the ChaCha and Salsa devices that appeared were soon discontinued. The noises emerging from Facebook HQ this time sound more optimistic.