BG Tweaks Chief's £12m Package Amid Protests

The FTSE-100 oil company BG Group (LSE: BG.L - news) will bow to City pressure over a £12m share award for its new chief executive after some investors indicated that they would revolt over the deal.

Sky News has learnt that BG will publish a shareholder circular on Wednesday which will outline revised proposals for a remuneration package for Helge Lund, who is joining from the Norwegian energy giant Statoil (Xetra: 675213 - news) .

Investors briefed on the changes said that Mr Lund would be obliged to hold onto the various tranches of the share award for longer than originally envisaged, and that it would now be tied to performance in areas such as safety and strategy.

However, the size of the £12m award is expected to remain unchanged, and it was unclear on Tuesday whether the modifications to its terms would be sufficient to appease disgruntled investors.

BG is also unlikely to tie the payment to quantitative performance measures ahead of an extraordinary general meeting that will be scheduled next month to approve the deal.

Under the terms of his appointment, Mr Lund will receive a base salary of £1.5m, fixed for five years; a 30% cash payment instead of a pension; a short-term annual cash bonus worth up to £3m; an annual long-term share grant valued at up to £9m; a one-off relocation allowance worth up to £480,000; and a buyout of unvested variable pay from Statoil in the form of BG shares worth up to £3m.

The lavish package would make Mr Lund one of the best-paid public company bosses in Britain, and has provoked unease despite his track record as an accomplished oil executive.

His remuneration is especially sensitive because the £12m share award falls outside BG's approved remuneration policy, which was voted on by shareholders earlier this year.

Reforms introduced by Vince Cable, the Business Secretary, give investors in public companies a binding vote on pay policies and an advisory vote on the previous year's remuneration report.

When Mr Lund's appointment was announced last month by BG, which has been hit by a prolonged period of underperformance, the company said: "Helge is not obliged to join BG Group if the [£12m] Share Award is not approved.'"

Some institutional investors interpreted that statement as a veiled threat that Mr Lund would walk away if the package was rejected.

The pay deal is reported to be worth ten times his Statoil remuneration despite the fact that BG's annual revenues are only 20% of those recorded by the Norwegian company.

BG has issued a string of profit warnings amid an ongoing fall in the oil price and poor performance relative to many of its peers.

One institutional shareholder called Mr Lund's pay award "dangerous" and said the original framework was "unsupportable because of the precedent it sets".

They declined to comment on whether they would support the revised terms.

Another BG investor said it was "relaxed" about the terms of Mr Lund's pay deal, saying that recruiting a proven industry leader was crucial if the company's fortunes were to be revived.

BG declined to comment on Tuesday.