UK - BT's pay-off to chief executive Sir Peter Bonfield has been attacked by institutional shareholders and corporate governance experts.
Bonfield is expected to receive a package worth around £1.8m when he steps down earlier than scheduled next January.
The massive golden goodbye has been described as unjustifiable by shareholders who point out that Bonfield’s tenure at the BT helm saw the firm’s share price slump from a high of almost £14 in 2000 to less than £4 this year.
One major BT institutional shareholder said: “As a chief executive he has been a failure so it is difficult to justify his pay-off. Going forward institutions need to pay more attention to contracts so these pay-offs do not happen for failure.”
Gartmore chairman Paul Myners called on businesses to have contracts that do not reward failure.
Speaking at the Society of Pension Consultants, Myners said: “We have to stand up and say that if we do not do that we are not speaking effectively on behalf of those who have entrusted us with their savings.
“Institutions end up owning shares in companies they do not believe in, run by people they do not have confidence in, because they are managing tracking error.”
An National Association of Pension Funds (NAPF) spokesman said: “Companies should of course honour contracts. But shareholders would expect the company to mitigate cost. If shareholder value has been damaged during the time a person has been involved there, then the individual concerned should ask themselves whether they should accept it.”
Corporate governance specialist Pensions & Investment Research Consultants (PIRC) has written to BT asking for clarification of the pay-off.
Under the terms of his contract, Bonfield will receive one year’s salary worth £820,000 from February 2002, one year’s on-target bonus of £615,000 and £50,000 for other benefits such as car and health insurance.
He will also receive his executive share awards which on October 30 were valued at £290,000. These will be paid out over three years.
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