When it comes to the furore over directors’ pay deals, it is often hard to determine whether a board has acted correctly or not in agreeing a remuneration package.
There are many factors involved in recruiting and then retaining key personnel and sometimes what looks like a sensible idea, such as paying for an executives’ relocation expenses, doesn’t look quite so inspired 12 months on if things don’t go exactly to plan.
Sir Martin Sorrell, who is due a £36m share payout from WPP, argues that in his case this is fully justified in terms of the amount of time and money he has invested in the group and there aren’t that many WPP investors who would disagree.
But when a company under performs, as Standard Chartered, the emerging markets bank, has over the past few months, there are rightly questions to be asked of the rest of the board and the remuneration committee if substantial pay awards are made.
Peter Sands, the outgoing chief executive, is taking a package of $5.1m at the bank, including spouse travel benefits, before handing over to banking wonderkid Bill Winters.
“That’s completely outrageous,” said one investor yesterday, arguing that StanChart has suffered from three profit warnings and a fall in investor confidence over the past year.
Rewards for failure are naturally frowned upon by corporate governance gurus at the likes of Old Mutual and Legal & General, and so it would not be a major surprise if outgoing chairman Sir John Peace got a bloodied nose at the bank’s forthcoming annual shareholder meeting.
On the other hand, many will argue that Sands did a pretty good job during the early years of his tenure and to clawback some of his contracted pay at this time might seem a touch vindictive.
In addition, most shareholders are just grateful they finally have the clear out of the board they have been waiting for and will be focused on the future, not the past.