By Adam Jones
Cairn Energy has given into shareholder pressure and dropped a plan to give its chairman an extra ?2.5m, in a further sign of hardening attitudes towards executive pay in the UK.
The FTSE 100 oil and gas explorer will no longer ask investors to approve the proposed share award to Sir Bill Gammell, its founder, following objections by some of its biggest shareholders.
The retreat was announced on Tuesday, a day after Vince Cable, the UK business secretary, unveiled plans aimed at curbing excessive boardroom pay by improving disclosure and giving investors more of a say.
Cairn had agreed with Sir Bill, a former Scottish rugby international, that he would receive an extra ?2.5m in shares as part of the disposal of a majority stake in its Cairn India subsidiary to Vedanta Resources and subsequent return of cash to investors.
The company had argued that the additional reward was necessary to encourage Sir Bill to meet a revised December 15 disposal deadline.
He had actually stood down as chief executive last summer after more than two decades in the role but had maintained lead executive responsibility for completing the deal.
The share award would have been deferred for three years. The company was also gearing up to donate ?1m to a charity or charities of Sir Bill?s choice if shareholders voted in favour of the new pay arrangement at a meeting on January 30.
However, some shareholders had privately expressed opposition to the lack of performance criteria in the award.
The Association of British Insurers, which represents some major institutional investors, issued a ?red top? warning, its highest level of alert on contentious corporate governance issues.
On Tuesday, Cairn said it would no longer ask investors to approve the share award, saying it had ?noted the comments received from several institutional shareholders and their representative bodies?.
In a brief stock exchange statement, it added that it would now consult further with investors on the matter.
It was not clear on Tuesday whether it would aim to come up with a new proposal to reward Sir Bill for the work on the Cairn India deal. The plan for the associated ?1m charitable donation has also been withdrawn.
Sir Bill will, however, continue to be entitled to a ?1.4m ?termination payment? due under the terms of his contract after the switch from chief executive to non-executive chairman.
Cairn shares – which have been hit hard in recent months by its failure to find commercial quantities of oil or gas in Greenland?s waters – fell 3 per cent to 282.6p in early morning trading in London on Tuesday. Sir Bill holds 3.3m shares in Cairn.
? The Financial Times Limited 2012