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Conflict builds over fund manager pay levels

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Fund managers are continuing to come up against shareholder opposition concerning executive pay levels and bonuses during the annual general meeting season, according to the Financial Times.

The conflict between investors and fund groups emerges as the European parliament debates pay caps for asset managers, including a limit to fund managers’ bonuses of 100 per cent of their fixed salaries.

Henderson Global Investors is set to be the next fund house to have its senior managers face scrutiny by investors, according to the newspaper.

Corporate governance adviser Pirc is encouraging Henderson shareholders to vote against high pay at the Henderson AGM this week.

Pirc head of communications Tom Powdrill told the FT he is worried “about excessive rewards to the chief executive, chief finance officer and chief operating officer” in 2012. He added that this is also likely to be the case for 2013 pay.

Henderson chief executive Andrew Formica – the highest-paid director in the company in 2012 – has a base salary of £350,000 and short-term bonus payments of £900,000 last year.

However Henderson head of corporate communications Richard Acworth says it is difficult to estimate the degree of opposition as many shareholder votes on resolutions for the forthcoming meeting were yet to arrive, including those on pay policies.

He describes bonus caps as “a blunt instrument that would also restrict fund managers from weathering volatile market conditions”. He also told the FT that in the absence of variable pay policy there would be more cost cutting, including job losses.

Acworth also notes that Formica’s overall salary, taking into account short and long-term incentives, was just over £3m in 2012, down from £4m a year earlier. He believes that “as long as variable pay rewards performance, it is a good mechanism”.

 According to the FT, the proposals to extend fund manager pay curbs, led by Green MEP Sven Giegold, gained majority backing at the European parliament last month.

Fund managers may also face a 200 per cent of salary bonus cap upon the approval from a majority of shareholders, as part of the proposed legislation.

Schroders is also expected to conflict with shareholders this week, following chief executive Michael Dobson’s annual cash bonus of £2.2m last year, compared with a base salary of £400,000.

Jupiter Asset Management faced controversy last month over uncapped bonuses for senior management, including chief executive Edward Bonham Carter and chief investment officer John Chatfield-Roberts.

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