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Fat cats are thinner by a whisker

“Finally it is worth mentioning some of the fat cats who prospered and departed this year, and who will no longer muddy their paws in our table. Top of these is Sir Philip Watts, latterly of Shell, whose pension pot expanded by another £2.6m last year to a total of £12.6m despite his leaving the company in March. That will net him £600,000 a year for life to go with his £1m golden goodbye. Another reward for failure went to…”

Daily Telegraph: Fat cats are thinner by a whisker:  Saturday 11 June 2005

(Filed: 11/06/2005)

Industry bosses netted below average pay rises last year, report David Cheesman and Malcolm Moore

Hiss! Has someone taken the bowl of cream away from Britain’s fat cats? According to the annual reports, the pay of our top 10 chief executives went up by a mangy 2.4pc last year.

This sort of skimmed milk emolument is enough to make Bustopher Jones’ tail droop.

Not only is the rise barely enough to cover the cost of inflation, it is far lower than the national average.

Our bosses are not skin and bones, of course. They still took home £30.3m last year.

However, it was a restrained set of awards in a year when the FTSE 100 rose by 7.5pc, and several companies made so much cash they were embarrassed into returning it to shareholders.

Even worse, two of the top 10 bosses, Jean-Pierre Garnier at Glaxo Smithkline and Bart Becht at Reckitt Benckiser, actually had their pay slashed.

In JP’s case, it was the weak dollar that exacerbated a small belt-tightening but poor Bart, who topped our table last year, saw his pay drop 14pc after Reckitt missed its targets. Even then, more than a third of shareholders complained he was still cleaning up.

Whatever is going on? Have the back-slapping remuneration committees finally capitulated after years of shareholder pressure? Not likely. They have merely found ways of squirrelling the rewards away.

Reckitt has simply stashed them under the counter, next to the range of scary chemicals it makes. The footnotes to the accounts reveal that Bart and his fellow directors consoled themselves after their lean year by cashing in over £5m of share options.

These options are just one of the many weapons that boards have at their disposal in the fight against frugality.

Nowadays a basic salary, which may not be as basic as all that, is merely an amuse bouche before a buffet of executive benefits.

Indeed, the biggest inflation has been in the number of pages of annual reports dedicated to directors’ remuneration, after the teams of consultants have carefully translated the sums involved into graphs, tables and language incomprehensible to shareholders.

There are performance-related bonuses, deferred bonuses, long-term incentive plans, housing allowances, and hefty pension contributions.

Phantom shares, which often turn out to be just as good as real ones, are difficult to value and impossible to compare. Unfortunately, they are omitted from our table.

Nevertheless, it is worth noting that directors such as Stuart Rose at Marks & Spencer received more than £3m of options and that

Luc Vandevelde, who left the company in far worse shape than he found it, picked up a variety of gifts amounting to more than £5.2m.

If Mr Vandevelde had been included in our table ranked on take home pay alone, he would have come in at a lowly 98.

Mick Davis, the stock market’s best paid boss, took home £4.7m in pay last year, but five times that sum in share options.

The consensus among the analysts is that Davis deserves the money for taking Xstrata from a backwater mining company to 40th position in the FTSE.

Since the beginning of last year, his company’s share price has risen from 691p to 1011p in trading yesterday.

It is a sweet success for “Big” Mick, who has always been clear about his ambitions: “Wealth, power and happiness – in that order”. In addition to the pay and options, the former bean-counter also gets a $183,000 (£98,920) housing allowance. That pays the rent on his pad in Switzerland, and he also has a house in Hampstead and two in his native South Africa, including one on the top of Table Mountain.

At Xstrata, he has firmly stepped out of the shadow of Brian Gilbertson, his former boss at BHP Billiton, but he is not yet in the same pay league.

Gilbertson picked up a pay-off of more than £5m to quit Billiton, a signing-on fee of £7m for an eight-month Indian summer at Vedanta, and then a reputed £30m for joining Russian aluminium producer Sual.

Still, at least Big Mick earns more than Chip Goodyear, Gilbertson’s successor at Billiton.

Last year, as HSBC will be quick to tell you, was the Chinese Year of the Monkey. Traditionally bluffs, ruses and deception abound in these years, so it is no surprise to find that bankers prospered.

Sir John Bond, chairman of the world’s local bank, certainly picked up more than just peanuts. His pay jumped by £1.5m to £3.65m, although as a chairman he does not feature in our table.

John Varley at Barclays got a £1.2m raise to £2.1m, and the value of his pension pot jumped by £2.5m.

Bob Diamond, who Varley beat to the top job at Barclays two years ago, does not feature in our table since he is the head of investment banking. He picked up £15m last year in pay and shares.

Charles de Croisset, who has since left the board of HSBC, got an extra £900,000 to £2.1m, and Eric Daniels, at LloydsTSB, won an £800,000 raise.

It was not such a good year for Charles Brady at Amvescap. The Anglo-American fund manager had a wretched year, and was forced to pay $250m to the US Securities and Exchange Commission to settle an investigation into some trading irregularities. As a result, Amvescap slashed its interim dividend and halved Brady’s pay to £900,000.

Just a few years ago, Brady’s salary was as high as £3m, but it is not plunging as fast as Amvescap’s share price, which was over 1600p in 2001, but was trading yesterday at just 333p.

Finally it is worth mentioning some of the fat cats who prospered and departed this year, and who will no longer muddy their paws in our table.

Top of these is Sir Philip Watts, latterly of Shell, whose pension pot expanded by another £2.6m last year to a total of £12.6m despite his leaving the company in March.

That will net him £600,000 a year for life to go with his £1m golden goodbye.

Another reward for failure went to Sir Peter Davis, who collected £2.6m for leaving J Sainsbury in a mess. Sadly for Sir Peter, his pay-off did not quite stretch to cover his new £3.5m, 82-foot yacht.

Richard North got a £1m payment when he was ousted from Intercontinental Hotels by Sir David Webster, and he made a further £1.1m from selling shares. Nobly, he has said he is hanging on to his remaining million or so share options.

Meanwhile the popular Jonathan Bloomer took a £1.6m pay-off after his “murky assassination” at Prudential by David Clementi.

It is also worth pointing out that the Telegraph table can sometimes seem a little misleading.

It could be argued that Niall Fitzgerald, formerly of Unilever, should be lower down, since his pay was inflated by a £1.2m “compensation payment” for leaving the board. Then again, perhaps he should be higher in the table, since the £1.4m he collected from his range of long-term incentives is not included.

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