The pandemic should have led to a kinder, gentler and fairer world of finance. This year began with Larry Fink, chief executive of £6.6 trillion investor Blackrock, extolling the virtues of better governance. Instead, the ‘greed is good’ culture is back.
Executives working for quoted companies may feel hard done by the standards of instant billionaires created by initial public offerings, big fees at investment bankers and the returns made by the private equity barons.
But that can be no excuse for taking rather than giving, and the excessive pay-outs being lavished.
The blame for fat-cat pay is often directed at flaccid pay committees and the cosy relationship with remuneration consultants drawn from Big Four accounting firms.
‘Greed is good’: Fictional crooked financier Gordon Gekko’s (played by Michael Douglas, pictured) motto in the movie Wall Street
However, it is hard to escape the conclusion that chief executives and other directors are taking advantage of a flawed system.
Phil ‘Miami’ Bentley at Mitie is a case in point. He has been remarkably successful since failing to make the top job at Centrica.
When he sold Florida-based Cable & Wireless to John Malone’s Liberty Global empire in 2015, his shares were reckoned to be worth £11.4m alone.
At outsourcing firm Mitie, Bentley works alongside colleagues who are near the bottom of the pay league.
The Mitie army has done a great job during Covid by keeping Mail staff healthy with sterling work on cleaning and sanitising our offices. If colleagues are keeping an eye on the boss, who is heading for a £5.7m pay-out, they would have a right to feel disaffected.
Investment advisory groups are taking a tough stand against Bentley’s pay and the remuneration report could receive a big dissenting vote at next week’s AGM.
Bentley’s long-term incentive plan, which offers 200 per cent of base salary and variable pay over the year of 221 per cent of salary, is unacceptable. The chief executive is paid 78 times the average of the rest of the workforce against the 20:1 recommended in governance circles. What may be fine among the yacht keepers of Miami is indecent in Southwark.
At outsourcing firm Mitie, Bentley works alongside colleagues who are near the bottom of the pay league
Also disturbing is the behaviour of Archie Norman and Carolyn McCall, two executives who have earned respect in their main roles as chairman of Marks & Spencer and chief executive of ITV respectively.
As independent directors at private equity Bridgepoint, which has just floated, investors had the right to expect clean hands. Instead, Norman showed poor judgement in accepting a signing-on fee of £1.75m and a salary of £200,000.
Norman’s lump sum, invested in Bridgepoint shares after tax, has already soared in value because broker JPMorgan Cazenove mispriced demand for the stock.
The £500,000 McCall accepted from Bridgepoint compromises her independence and will hardly have more lowly paid producers and camera operators dancing in the ITV aisles.
Norman and McCall are heavyweights in the public sphere but have behaved like teenage footballers signing their first contract in the Premier League.
Case number three is most extreme. JPMorgan (JPM) chief executive Jamie Dimon is the world’s top banker, despite past brushes with the authorities over the ‘London Whale’ trading scandal.
His annual pay at JPMorgan came in last year at over £23m, making him the second best paid bank chief in the US. Through various share ownership plans he is reckoned to have accumulated a $1bn (£730m) equity stake in JPM.
Yet the board this week dished out new options worth $50m (£36.5m), which vest in five years. As a chief executive already earning 395 times the median salary at the bank, and already supremely rich, this is terrible look when the world economy is being strangled by the Delta variant.
Over-cooked, insensitive pay awards in the boardroom are in danger of turning the international tide in favour of a wealth tax.
The bare faced chutzpah of US private equity outfit Advent knows no bounds.
Having bought Cobham in 2020 and stripped the pioneer aerospace company of all UK manufacturing, it is deploying the name of the Poole-based company to try to buy Ultra Electronics for £2.6billion.
The target firm supplies key components for both BAE’s Typhoon Eurofighter and F35 advanced aircraft.
There are vague promises on preserving national security. It would be dispiriting if, by using its Cobham ownership, Advent may have discovered a way of avoiding scrutiny under the new UK National Security and Investment Act.
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