Standard Life Aberdeen’s co-chief executives will see their maximum pay packages shrink by up to a quarter in a sign of the rising pressure companies are under to reel in fat cat pay.
The remuneration committee of the board at the recently merged company has proposed cutting the maximum pay of co-chiefs Martin Gilbert and Keith Skeoch by 25 and 11.8 per cent respectively.
The clampdown on remuneration at the UK’s largest listed fund house comes at a time of intense scrutiny on executive pay in the UK. Last week, Jeff Fairburn, chief executive of Persimmon, the housebuilder, was forced to give up £30m in bonuses after criticism from shareholders, including Standard Life Aberdeen.
Under the new proposals at SLA, the fund house’s two leaders will receive a maximum of £4.3m a year, with Mr Skeoch suffering a cut to his fixed pay while Mr Gilbert’s maximum bonus has been reduced from 1,000 per cent of his fixed pay to 600 per cent.
“The level of remuneration for executives remains under intense scrutiny from shareholders and their representatives, the government and the general public,” the £655bn investment company said in its annual report.
“As a result, with the introduction of the new remuneration structure and alignment of the remuneration for our co-CEOs, we have reduced the maximum opportunity.”
According to the company, the chief executives’ bonuses will depend on various metrics, including the investment performance of SLA funds, level of inflows, profits before tax, as well as non-financial objectives.
Unlike other companies that have recently overhauled executive pay, SLA is both a listed business and a big shareholder in other companies, leaving it in a particular position.
The company has been a vocal opponent of excessive executive pay in the UK and the US. Last week, Euan Stirling, global head of stewardship at SLA, called the bonus for Mr Fairburn of Persimmon “ grossly excessive”.
Aberdeen and Standard Life Investments, the companies that merged to create SLA, voted against about a third of pay resolutions globally in 2017. SLA did not merge its governance arms until this year.
The fund manager, which was created through the merger of insurer Standard Life and asset manager Aberdeen last year, said in its annual report that it had consulted about 40 per cent of its shareholders over the proposals and they were “generally supportive”.
Despite the possible cut to future pay, both chief executives enjoyed large bonuses last year, at 143 per cent of salary for Mr Skeoch and 569 per cent of salary for Mr Gilbert.
Mr Skeoch was paid £3m last year, while Mr Gilbert received £1.3m. Mr Gilbert’s smaller sum was due to his bonus being based on only the period after the two companies merged in August.
Their bonuses came despite the company’s share price falling by more than 11 per cent since the merger was completed in August.
But Mr Skeoch said the business was “going really well”.
He added: “Martin and I are here to make a success of the business for clients, employees and shareholders. We are focused on delivering that long-term strategy.”
The company announced on Friday it was selling its insurance business to Phoenix Group in a £3.2bn deal that will cement the company’s transition to a pure-play asset manager. The deal is expected to close during the third quarter.
SLA now expects to generate annual savings of £250m from the merger, up from a previous estimate of £200m. SLA reported net outflows of £31bn last year, down from combined outflows of £36.8bn in 2016.
Mr Skeoch said the company was winning new business. “My best guess is that . . . redemptions will slow during the course of 2018.”
The average total pay of a FTSE 100 chief executive fell from £5.4m to £4.5m in the 2016-17 financial year, according to the High Pay Centre, a think-tank, and the Chartered Institute of Personnel and Development.
According to a report from the Pensions and Lifetime Saving Association, the trade association made up of more than 1,300 retirement schemes, there were 49 pay report and policy resolutions with “significant dissent” in 2017 at FTSE 350 companies last year, up from 38.
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