BG Group faces shareholder revolt over £25m pay deal for new boss

Investors threaten not to support deal for Helge Lund, recently recruited from the Norwegian state oil company Statoil

BG Group is facing mounting criticism over a £25m pay deal for its new chief executive, with all the main investor advisory bodies raising concerns about the package offered to Helge Lund.

The influential US-based advisor Glass Lewis on Friday added to the chorus of dissenting voices by saying shareholders in the oil and gas group should reject the package as it stands.

There are expectations that the company will meet investors for discussions over the package for Lund, who is being offered a one-off £12m in shares and up to £13.5m a year if he hits performance targets. The award of shares is being put to a vote scheduled for 15 December and the company has warned shareholders that Lund is “not obliged” to join the company if it is not approved. But Glass Lewis asserts that the need for shareholder approval could be averted altogether if the award of shares was cut to £8.3m.

Meanwhile investors – including Railpen which manages £20bn of funds for railway workers – are also urging each other not to support the deal for Lund, who has been hired from Statoil and is due to join in March.

Glass Lewis’s verdict comes after those of rival advisory bodies ISS, the Investment Management Association, Manifest and Pirc. This heaps pressure on the BG chairman, Andrew Gould –who has been standing in as chief executive since April and recruited Lund – as well as the chairman of the remuneration committee, Sir John Hood.

Manifest has suggested the meeting should not go ahead for now and Glass Lewis said that as Lund was not due to join until March there was “sufficient time to revise the terms of the award, or devise an alternative award structure under the existing policy”.

Attaching new performance targets to the award of shares may help defuse the situation, as Glass Lewis said the current ones were “somewhat vague personal objectives that appear to set the bar quite low”.

The row over pay comes as BG’s shares were sent sliding on Friday after Thursday’s decision by the major oil-producing countries not to cut production to shore up world oil prices. BG’s shares were the biggest fallers on the FTSE 100, closing more than 8% down, which will affect the ultimate value of the shares awarded to Lund.

The package is causing controversy with investors because it breaches a pay policy they agreed to only six months ago. It includes a salary set at £1.5m for five years and is around seven times more than Lund earned at Statoil. The salary alone, according to Glass Lewis, is more than 30% above that of the bosses of BP and Royal Dutch Shell, the other two main rivals listed in London.

The vote is regarded as a major test for investors as BG is the first major company to have broken its own policy since the business secretary, Vince Cable, introduced rules last year guaranteeing shareholders such a say over long-term pay.

Deborah Gilshan, the corporate governance counsel at Railpen, said she would not back the award.

“Railpen will not be supporting this pay package at the meeting on 15 December as we do not consider it is in the long-term interests of our beneficiaries.

“We are now calling on the fund management industry to consider the long-term interests of their clients by voting against this,” she said.

“This is a situation no board should put its shareholders in and our concerns are not limited to the situation at BG Group itself but the wider implications it has for the UK marketplace,” she said.

Legal & General, which owns 2.7% of BG’s shares, spoke out earlier this week to say that BG could set a precedent by abandoning its pay policy so quickly. Aviva also said it was concerned.

A BG spokesman said: “We believe Helge Lund is the right person to lead BG Group. His proposed remuneration is competitive in the international oil and gas industry. The shareholder vote on Helge Lund’s pay is in line with the letter and spirit of corporate governance legislation.”

Contributor

Jill Treanor

The GuardianTramp

Related Content

Article image
BG Group boss’s £25m pay deal criticised by shareholder group
Investment Management Association issues red top alert over deal to lure Helge Lund from Norway’s Statoil

Sean Farrell

24, Nov, 2014 @8:09 PM

Article image
Frasers Group could face shareholder revolt over new CEO’s £100m bonus
Advisory groups advise voting against remuneration plan flagging ‘excessive payouts’

Sarah Butler

28, Sep, 2021 @6:31 PM

Article image
Barclays boss faces shareholder revolt over whistleblowing case
Advisory group tells investors to abstain from vote to re-elect Jes Staley to board after he tried to unmask whistleblower

Jill Treanor City editor

27, Apr, 2017 @6:37 PM

Article image
Ryanair boss could get €99m bonus despite shareholder revolt
Michael O’Leary may benefit from fixed-price shares after 50.5% remuneration approval

Gwyn Topham Transport correspondent

19, Sep, 2019 @4:01 PM

Article image
BG Group shareholders rebel against Helge Lund pay deal
Almost one in five shareholders vote against remuneration report despite chairman Andrew Gould saying the new CEO’s £25m pay deal was necessary

Sean Farrell

05, May, 2015 @3:09 PM

Article image
BP's pay committee chair should quit over shareholder revolt
After nearly 60% of shareholders reject Bob Dudley’s £14m package, the woman who signed off on it should fall on her sword

Nils Pratley

14, Apr, 2016 @3:28 PM

Article image
BG pay deal ‘excessive and inflammatory’, says Institute of Directors
IoD says £25m pay for new boss Helge Lund could put executive pay on the political agenda ahead of the general election

Jill Treanor

25, Nov, 2014 @8:00 PM

Article image
Ladbrokes owner faces shareholder revolt over £19.1m payout to boss
Betting firm GVC braced for new row after two years of rebellion by investors

Rob Davies

01, May, 2019 @1:17 PM

Article image
Entertainment One faces shareholder revolt over pay
Maker of The Hunger Games and Peppa Pig narrowly avoided pay defeat last year

Julia Kollewe

09, Sep, 2018 @3:35 PM

Article image
Sir John Peace suffers latest shareholder revolt at Experian
Investors at Standard Chartered, Burberry and now Experian have rebelled at AGMs of firms chaired by the City grandee

Jill Treanor

16, Jul, 2014 @12:09 PM