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BG Group's £25m deal for new chief attacked by directors' group Executive pay: IoD attacks 'excessive' BG deal
(about 9 hours later)
A pay deal proposed for the new head of gas explorer BG Group has been branded "excessive and inflammatory" by one of the UK's leading business lobby groups. A proposed £25m pay package for the new head of oil and gas giant BG Group has been branded "excessive" and "inflammatory" by the Institute of Directors (IoD).
The Institute of Directors said a £25m deal for Helge Lund would damage the reputation of UK business if approved at a shareholders' meeting next month. Simon Walker, director general of the IoD, said Helge Lund's deal would damage the reputation of UK business.
The IoD acknowledged its criticism was strong, coming from a body whose job is to promote the interests of UK firms.The IoD acknowledged its criticism was strong, coming from a body whose job is to promote the interests of UK firms.
BG said Mr Lund was being paid a "competitive market package".BG said Mr Lund was being paid a "competitive market package".
Mr Lund joins BG as its new chief executive in March, having been recruited from Statoil with the award of shares worth £12m and the chance of up to another £13.5m in pay, pension and other benefits if performance targets are hit. 'Red rag'
Mr Walker said the proposed pay package was " excessive, inflammatory and contrary to the principles of good corporate governance".
Speaking to the BBC, he said: "We think in any terms this £25m pay settlement is grossly excessive, it will inflame public sentiment , it will be a red rag to the critics of capitalism."
Mr Walker added said that the timing of the deal, so close to a general election, could put executive pay on the political agenda.
"It damages the reputation of British business as a whole to behave in this cavalier fashion, that has no regard for strongly held public sentiment... this is six months before a general election, in which you have an opposition that is already campaigning vigorously against big business."
Mr Walker said he was "very keen that shareholders deal with the situation".
Mr Lund's pay will be put to shareholders at a meeting next month. Mr Lund will join BG as its new chief executive in March, having been recruited from Statoil with the award of shares worth £12m and the chance of up to another £13.5m in pay, pension and other benefits if performance targets are hit.
He established his reputation after transforming Norway's Statoil from a national operator into a global company.He established his reputation after transforming Norway's Statoil from a national operator into a global company.
But some BG shareholders have voiced concern about the size of the annual pay package being offered by the FTSE 100 company.But some BG shareholders have voiced concern about the size of the annual pay package being offered by the FTSE 100 company.
The Investment Management Association, a body representing shareholders, issued a "red top" alert - a warning about potential corporate governance breaches.The Investment Management Association, a body representing shareholders, issued a "red top" alert - a warning about potential corporate governance breaches.
Now the IoD has weighed in with criticism that the pay package "is a red rag to the enemies of the free market". 'Competitive' package
Simon Walker, the IoD's director general, said: "The Institute of Directors is always reluctant to criticise an individual company. However, we do have a responsibility to criticise an action that brings the whole of British business into disrepute and threatens already fragile attitudes to corporate Britain. Mr Walker said the £25m sum was especially excessive given BG's size. Chief executives at the much-larger Royal Dutch Shell and BP have smaller pay packages.
"For that reason we state explicitly our strong opposition to BG Group's recommended £25m pay deal for its incoming chief executive. It is excessive, inflammatory and contrary to the principles of good corporate governance."
'Serious damage'
He said it was especially excessive given BG's size. Chief executives at the much-larger Royal Dutch Shell and BP have smaller pay packages.
Mr Walker added: "This pay deal would do serious damage to the reputation of British business six months ahead of a general election and at a time when the reputation of UK plc is still suffering."
The IoD has raised eyebrows before with criticism of pay and bonus issues at Barclays and Sports Direct. But a spokesman accepted that this BG criticism was its strongest yet of a major company.The IoD has raised eyebrows before with criticism of pay and bonus issues at Barclays and Sports Direct. But a spokesman accepted that this BG criticism was its strongest yet of a major company.
BG declined to comment specifically on the IoD's comments. But a spokesman said: "We believe Helge Lund is the right person to lead BG Group. His proposed remuneration is competitive in the international oil and gas industry.BG declined to comment specifically on the IoD's comments. But a spokesman said: "We believe Helge Lund is the right person to lead BG Group. His proposed remuneration is competitive in the international oil and gas industry.
"The shareholder vote on Helge Lund's pay is in line with the letter and spirit of corporate governance legislation.""The shareholder vote on Helge Lund's pay is in line with the letter and spirit of corporate governance legislation."