Top investors ‘can’t be trusted’ to vote down bosses’ giant pension payouts
The reason? They get MORE than under fire FTSE bosses – and MPs are furious
POWERFUL asset managers cannot be trusted to vote down exorbitant pension payments to the bosses of companies where they hold shares – because they hand lavish deals to their own top brass, MPs have warned.
The vast retirement perks pocketed by company chiefs have emerged as the most contentious issue for investors voting on executive pay at this year’s annual general meeting season, which has just kicked off.
Asset management firms – who hold key voting rights at AGMs – have been urged to vote down pension payments to bosses worth more than 25 per cent of their salaries after The Mail on Sunday revealed that one in ten FTSE100 chiefs were given pension cash each year worth at least 40 per cent of their basic pay.
But now research by this newspaper has revealed that some of the largest institutional shareholders are handing gigantic pension perks to their own executives.
In one case, a fund management chief is in line for nearly £24million in total retirement benefits. Another executive received the equivalent of nearly £870,000 for his pension in a single year – equal to 31 per cent of his basic pay. The bosses behind major shareholders in UK companies – including Columbia Threadneedle, Deutsche Bank, Sun Life Financial and State Street – all benefit from huge retirement packages, the analysis showed.
The Mail on Sunday’s findings last night prompted Rachel Reeves, chairwoman of Parliament’s influential Business Committee, to claim that major investors are ‘not up to the task’ of restraining firms on excessive pension payments.
The MP said: ‘Investors should be holding remuneration committees to account on executive pay, but the reality is that asset managers have too often shown they are not up to the task, unwilling to challenge and unbothered by huge pay awards.’
This newspaper’s research found that State Street’s former chief executive Joseph Hooley has accumulated a total pension entitlement of £23.8 million through four different schemes at the firm.
The company had to set aside an extra £2.7million last year to meet these obligations. The extra provision is due to changes in assumptions about the cost of providing his retirement income. Hooley, who left the asset manager in December, received £12.3million in total for 2018. He received a salary of £770,000, but his variable pay amounted to £11.4million.
State Street said it voted against 15 per cent of the 451 pay packages flagged up to its team in 2018 and saw the ‘increasing reputational risk poorly structured executive compensation plans pose to firms’.
State Street is one of the top shareholders in HSBC, which has been forced to slash pension awards for executive directors to 10 per cent of basic salary. The bank’s contributions are now lower than those for bosses at Legal & General and Standard Life Aberdeen, two of its top ten shareholders.
Jim Cracchiolo, chief executive of Columbia Threadneedle’s parent Ameriprise Financial, has accumulated a total pension entitlement of £11.2million. In total, he received £19.7 million remuneration in 2018.
Columbia Threadneedle counts itself as one of the most vocal of shareholders in the City, opposing Unilever’s proposed move to Rotterdam and The Restaurant Group’s acquisition of Wagamama. It voted against 17 per cent of the remuneration policies proposed by UK company boards last year.
Canadian asset manager Sun Life Financial gave its boss Dean Connor £229,592 towards his pension last year, representing 36 per cent of his £630,000 salary.
Sun Life is a top ten shareholder in drinks maker Diageo, consumer goods firm Reckitt Benckiser and fashion house Burberry – all of which offer their chief executives pension contributions of more than 25 per cent of base salary.
A spokesman for Sun Life said: ‘While we don’t disclose our voting choices, we actively monitor our portfolio and make decisions based on a wide range of factors consistent with others in our industry.’
Deutsche Bank awarded its boss Christian Sewing a pension contribution of £870,000 – 31 per cent of his £2.84million-a-year salary. The German bank is the majority owner of DWS Group, the asset management arm it spun off 18 months ago. DWS is one of the biggest investors in travel firm Tui, which faces a revolt over chief executive Friedrich Joussen receiving £489,000 in annual pension contributions – 51 per cent of his basic pay.
A report published last week by Rachel Reeves’ Business, Energy and Industrial Strategy Committee found the public ‘cannot rely on shareholders to exert pressure’ on boards. It continued: ‘Asset managers are extremely highly paid and tend to be rewarded with large bonuses based on performance on a one or two-year basis.
‘In these circumstances, it may be awkward, if not hypocritical, for them to criticise pay policies for prioritising short-term financial incentives.’
A spokesman for the Investment Association, the asset management trade body which has urged shareholders to vote down large pension awards, said: ‘Shareholders are clear they want executives’ pension contributions to be in line with the rest of the workforce.’