Aviva chief executive Andrew Moss stepped down this week after 60% of shareholders voted against his 2011 pay package. The share price has fallen by 60% since his arrival in 2007. Yet his basic pay has risen by 14%, while his bonus has jumped to 120% of his salary from 80% five years ago.
Anger over high pay for poor performance has also prompted the departure of Trinity Mirror boss Sly Bailey and AstraZeneca’s David Brennan. This ‘shareholder spring’ has also seen major protests over executive pay at Barclays, Xstrata, William Hill and Inmarsat. Shareholder votes on pay packages are merely advisory, but the government plans to make them binding.
What the commentators said
It’s about time the executive pay gravy train ground to a halt, said Alex Brummer and Ruth Sunderland in the Daily Mail. The “supine attitude of big shareholders” has helped create “the most cosseted and grasping generation of bosses ever seen in this country”.
So what took investors so long? As tough times have made it harder to achieve high returns, shareholders “are waking up to the fact that ‘pay-for-performance’ too often translates into pay without the performance to match”, said the FT. When equity markets are weak, institutional shareholders’ own investors are especially likely to “moan and threaten to withdraw their funds”, said Allister Heath in City AM. “Booming markets are bad for corporate governance: only the worst excesses get stopped”. More defeats of bumper pay packages look likely now that pay votes are to be made binding. As the FT’s Jonathan Guthrie put it, “the genie of executive pay reform is well and truly out of the bottle”.