THE NEW YORK TIMES
Aviva Chief Resigns Over Shareholder Pay RevoltBy JULIA WERDIGIER
Chris Ratcliffe/Bloomberg NewsThe London headquarters of Aviva,
11:55 a.m. | Updated
Investors balked when Mr. Moss was poised to receive a raise from the board for this year despite a slump in the company’s stock price. Although he turned down the 4.8 percent increase in salary on April 30, at a turbulent meeting last Thursday, a majority of shareholders who cast votes still opposed the company’s remuneration report.
The vote followed recent protests of million-dollar executive pay packages at Barclays, UBS and Citigroup. Shareholders have been annoyed by companies that they contend are awarding large paychecks even as shareholders’ returns have fallen or remained dismal.
Investors’ discontent is not limited to financial companies. Unilever, the British-Dutch consumer goods company, is expected to face criticism on pay at its shareholder meetings Wednesday, while WPP, the advertising giant, may come under fire at its meeting next month over executive pay.
“Shareholders have finally been forced into action because of the lower returns they’ve been getting,” said Justin Urquhart Stewart, co-founder of Seven Investment Management. “Shareholder returns and pay rewards are completely out of whack.”
Shareholders — including large institutional investors and pension funds — are balking at rich pay packages for senior executives when households across Europe are being asked to tighten their belts as governments cut spending and increase taxes.
“We live in an age of austerity, and this will shine through on remuneration as well,” Mark Hoble, a partner at the consulting firm Mercer, said. “If companies want to pay high bonuses, they have to really communicate and illustrate that there is a company performance to match it.”
The outcry also is occurring as some governments weigh legislation to change pay practices.
While such votes are not binding in
For some executives, the pressure was too much. Mr. Moss resigned after 54 percent of the votes cast by shareholders opposed Aviva’s remuneration report.
More than a third of Aviva’s investors are British, according to Thomson Reuters data. The rest are elsewhere in Europe and in Asia, and nearly 15 percent are in the
Some shareholders said they were appalled at the pay levels, given that Aviva was one of the worst performing stocks among its peers last year. During his five years leading the company, Aviva’s share price has fallen 60 percent. Mr. Moss has also pursued an expansion strategy that some investors criticized as muddled.
Aviva expanded in
Aviva said on Tuesday that Mr. Moss “felt it was in the best interests of the company that he step aside to make way for new leadership.”
He is expected to leave with a £1.5 million, or $2.4 million, payout, including 12 months of base salary, or £960,000, and £300,000 to settle any claims for bonus payments. The 4.8 percent raise would have increased his salary to £1 million.
Shares of Aviva rose nearly 6 percent in
Other chief executives of British companies have quit under investor pressure. David Brennan resigned as chief executive of the drug company AstraZeneca in April after the company lost several billions of pounds in market value last year partly because of problems with drug development projects and stiff competition. Mr. Brennan’s departure was announced just hours before the company’s annual shareholder meeting.
Last week, Sly Bailey stepped down as chief of Trinity Mirror, the British newspaper publisher, after some shareholders took issue with her annual remuneration when earnings at the company fell 15 percent. Shareholders criticized the £1.7 million pay package for her even as operating profit fell to £92 million in 2011 from £138 million in 2010.
At WPP, executives are bracing for a turbulent annual meeting next month. The company awarded Martin Sorrell, its chief executive, a 60 percent increase in total pay to £6.77 million, even as the firm’s share price dropped 14.4 percent last year.
“The latest shareholder revolts are a sign that there clearly needs to be a much greater alignment between what directors do and shareholder interests — we must promote that,” said Chuka Umunna, the Labour Party’s candidate for business secretary.
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