Anglo bosses to forfeit bumper share awards after 2016 revolt

Executives at Anglo American (LSE: AAL.L - news) , the FTSE-100 mining group, face the prospect of forfeiting millions of pounds in share awards following an investor revolt last year which helped provide impetus for a wider Government crackdown on boardroom pay.

Sky News has learnt that Anglo is putting the finishing touches to a new remuneration policy that will cap the amount that bosses can earn from long-term incentive plans handed out when the company's shares were being hammered by depressed commodity prices.

Investors briefed on the plans, which could result in Mark Cutifani, Anglo's chief executive, giving up millions of pounds in potential gains when the awards vest, said they expected the template to be employed more widely across corporate Britain.

The level of the cap will be set at the base price of the share awards when they were granted, meaning that the number of shares which ultimately vest after three years - assuming Anglo's share price has sustained its recovery - would then be slashed.

One City source said the cap would be both retrospective - applying to 2014, 2015 and 2016 LTIP awards - and forward-looking, with details set out in the miner's annual report next month.

Shareholders were furious when Anglo granted large numbers of shares to executives in March 2016 when the company's share price was at a multi-year low.

Since then, it has trebled in value as some of the base commodities which comprise a large part of Anglo's business - coal, copper, iron ore and nickel - have soared in value.

The potential for Mr Cutifani and others to reap windfall gains from a recovery in the shares led to more than 40% of votes at last year's annual meeting to be cast opposing the directors' remuneration report.

Sir Philip Hampton, the non-executive director who chairs Anglo's pay committee, has been consulting with investors on the plans for several months, according to two people who have discussed the new framework with him.

As the chairman parachuted into Royal Bank of Scotland (LSE: RBS.L - news) after its bailout by taxpayers in 2009, Sir Philip is no stranger to rows over executive pay.

One investor said they were "impressed" at the formula devised by Anglo because it would defuse future rows about windfall gains.

Another source said Anglo was also planning to reduce the maximum size of LTIP awards to its executive directors from the current level of 350% of salary.

Anglo, which announced last week that Sir John Parker would retire as its chairman later this year, is forecast by analysts to report earnings before interest, tax, depreciation and amortisation of $6bn (£4.8bn) when it announces full-year results on Tuesday.

Miners and oil companies whose value partly depends on the underlying prices of the commodities they produce have traditionally argued that while executives can benefit from awards granted when share prices are low are penalised when the reverse is true.

The conflict with shareholders which embroiled Anglo and others last year has prompted some companies to explore alternative executive pay structures such as issuing restricted stock, which hands executives a guaranteed chunk of shares, although this model is far from universally popular.

Ministers are considering new curbs on boardroom pay following the deadline for responses to a green paper covering executive remuneration and broader corporate governance issues.

An Anglo spokesman declined to comment on Monday.