Yahoo Finance RSA Faces Investor Backlash Over Hester Pay
The FTSE-100 insurer RSA Group is facing a backlash from leading investors over part of the pay deal awarded to Stephen Hester, its chief executive.
Sky News understands that a number of large shareholders in the company are close to deciding to oppose RSA's remuneration report at next month's annual general meeting.
The institutions' unhappiness stems from a decision by RSA's remuneration committee to grant Mr Hester, the former boss of Royal Bank of Scotland (LSE: RBS.L - news) , a long-term share award worth three times his £950,000 basic salary.
The insurance company, which ordinarily makes such awards worth a maximum of 230% of salary, had said last year that an identical award to Mr Hester was a one-off.
Some investors are angry that RSA has reneged on that pledge without providing what they believe is an adequate justification.
The precise level of investor disquiet over the issue could not be identified ahead of RSA's May 8 AGM.
However, one leading investor, who declined to be named, said:
"We back Stephen Hester as the chief executive of the company, but we are irritated that having been told that the 300% LTIP award was a one-off, the remuneration committee has changed its mind without any real explanation.
"The company's performance last year was not sufficiently strong to warrant this kind of additional award."
A substantial revolt against the company could embarrass RSA and Mr Hester, whose pay was constantly in the spotlight during his time at RBS.
He forfeited annual bonuses on several occasions amid intense political pressure, and was eventually forced out by George Osborne, the Chancellor, in 2013.
Last month, it emerged that he was receiving two-thirds of his annual bonus for 2014 despite the company missing financial performance targets.
RSA's annual report said: "In recognition of his criticality to the transformation of the company, Stephen Hester’s maximum LTIP opportunity in the 2015 grant will, by exception, be 300% of salary at maximum vesting.
"His future LTIP grants will made at no more than 230% of salary, which is the group's usual level of award for executive directors".
The company said that executive directors such as Mr Hester are required to retain all vested shares arising from these incentive plan for two years after they vest, and that they were subject to the company's policy for clawing back pay awards.
In a further statement given to Sky News on Thursday, RSA said: "Although the previous intention upon Stephen’s appointment in 2014 was that future grants would not exceed 230% of salary, the Remuneration Committee believed a further award at 300% of salary was appropriate in 2015.
"This level of grant was given in recognition of the crucial role Stephen has in the transformation of the Company over the next few years".
A spokeswoman added that none of the £2.85m share award would pay out "unless challenging performance conditions are met during the three year performance period of 2015-2017".
