The £16.4million of rewards shared among five Centrica chieftains and the £2.8million handed to Reckitt Benckiser boss Rakesh Kapoor is yet more proof that top corporate executives exist on a different plane from everyone else in austerity-stricken Britain.
FTSE 100 firms now spend huge sums with ‘remuneration consultants’ to devise schemes that supposedly tie executive pay to the performance of the business – though any such linkage often seems dubious.
Their hope is to convince shareholders and a sceptical public that the top echelon deserves its annual jackpot. The question of how those rewards relate to customers and lower level employees is not considered relevant.
Money to burn: The top five directors at Centrica shared a £16.4million payoutYet the fact remains that most consumers struggling to pay their bills will find the sheer size of executive pay packets astonishing and indefensible.
Take Phil Bentley, the managing director of the British Gas division that supplies UK homes and businesses. He is leaving the company to follow his ambition of becoming a chief executive somewhere else.
More... British Gas bosses pocket £16.4million in pay and bonuses while gas and electricity bills go through the roof Prudential is fined £30million for failed AIA takeover bid
Most employees in that situation would receive nothing more than a wave goodbye
After Bentley steps down from the Centrica board in the summer, however, he will be kept on for another six months as a consultant, being paid up to £315,000 while he looks for his new job.
Centrica reckons it will be helpful to have him available to advise on the restructuring of his divison, which may or may not be a good reason to keep him around.
Either way, Bentley hardly needs a cushion – he has accumulated a nest-egg of around £10million in shares and incentives over his 13-year career at the company.
That is not even counting his pension pot of £5.4million from Centrica and previous employers that he can take at age 58.
Consultancy deals for departing executives seem to have become the latest form of largesse.
In a similar vein, Barclays is keeping on its former chairman Marcus Agius – who did the honourable thing and resigned over the Libor rate-rigging scandal – in a £175,000-a-year consultancy role.
I am sure neither of these arrangements will turn out to be such poor value as Eric Daniels, who was given a consultancy by Lloyds when he left in 2011 but ended up being paid £500,000 by the state-backed bank for doing no work.
Nevertheless, such five-star treatment is quite something, particularly at a time when millions of Britons face the financial misery of being made redundant with only the scantest of safety nets.
Thiam’s troubles
Investors who were outraged by the Pru’s £24billion takeover bid for AIA have been vindicated at last.
The £30million fine for failing to inform the regulators early enough of its controversial plan to bid for the Asian insurer is very large for what it paints as a ‘technical’ breach.
Even more unusual is the personal censure meted out to chief executive Tidjane Thiam, which must count as a major humiliation. Even the bosses of failed banks have not been censured in this way, though admittedly they lost their jobs.
When Thiam embarked on the ill-starred takeover bid, he was just six months into the job.
In the thick of it, he saw fit to accept a part-time job on the board of French bank Societe Generale before he was forced to back down by angry investors.
The AIA deal would have involved an enormous rights issue and raised question marks over capital at a time when the entire financial system was in a fragile state.
It was an expensive exercise in hubris, costing shareholders £377million.
There are also the undisclosed costs of hiring law firm Clifford Chance to conduct the Section 166 investigation over two-and-a-half years.
Thiam was considered lucky to keep his job at the time, with former chairman Harvey McGrath paying the price with his head. Supporters say Thiam’s job remains safe and the censure has not even put him on a ‘yellow card’.
It is true this blast from the past comes at a time when the Pru has been doing rather well, delivering strong profits and dividend increases in contrast to rivals.
That may dampen shareholder anger over the AIA debacle, but whether or not Thiam has performed robustly since is irrelevant to his conduct over the deal.
He cannot be considered fully rehabilitated unless he shows some real contrition.
Preferably that should involve a clear statement he has learned the lessons of that unhappy episode, along with a personal and public apology to shareholders.
The Pru’s remuneration committee should also consider whether there is a case for bonus clawback.
Thiam is under the eye of chairman Paul Manduca, a respected City veteran. He must ensure there is no further waywardness from his chastened chief executive.