Royal Dutch Shell Plc  .com Rotating Header Image

Generous pension pots for the board while occupational schemes face shortfall

The Guardian (UK): Generous pension pots for the board while occupational schemes face shortfall

“Under Sir Phil’s leadership Shell was shaken by a crisis over the level of its reserves, which it eventually conceded had been overstated by some 25%. Investors were shocked to read a leaked email from former exploration boss Walter van de Vijver to Sir Phil, the former chairman, in which he said: “I am becoming sick and tired about lying about the extent of our reserves issues.”

Thursday August 4, 2005

Phillip Inman

Directors of Britain’s biggest companies can look forward to generous pension payouts, according to the Guardian’s survey of top executive pay.

The nine executive directors on the Unilever board have a pension pot worth £80m to see them through retirement – and the figure will almost certainly rise as the group makes more contributions before many of them retire.

Niall FitzGerald, the Anglo-Dutch consumer goods firm’s former chief executive, is one of two directors who have already started taking their pensions. He retired last September after 37 years service with a pension pot worth almost £17m. His colleagues Keki Dadiseth and Patrick Cescau, have also grabbed the top 10 places in the league of corporate pension pots, though they have yet to retire.

Mr FitzGerald’s pot translates into an annual retirement income in excess of £850,000, which he will combine with the £500,000 a year he is now earning as non-executive chairman of information group Reuters.

The huge pensions paid to Unilever bosses are likely to fuel accusations that senior executives have successfully insulated themselves against the crisis afflicting pensions and pension saving.

While millions of workers have been told final salary schemes are no longer affordable they are still a mainstay of boardroom remuneration.

Every FTSE 100 company except Rolls-Royce has now closed its defined benefit schemes to new employees or signalled an intention to do so. The stock market crash of 2000, coupled with increasing life expectancy, low inflation and falling interest rates, makes them prohibitively expensive, employers argue.

The total deficits of the FTSE 100 stands at £52bn according to accountants Deloitte, which predicted earlier this year that at the current rate of contributions, it will take about 15 years to clear the UK’s pension fund deficits .

However, they are still available for the majority of company directors.

Unilever, despite a £1.7bn deficit in its £9.4bn pension fund, paid an extra £3m into Mr FitzGerald’s pension in his final year.

The TUC has criticised board remuneration committees for sanctioning these payments at a time when company occupational schemes face huge shortfalls. The TUC has also criticised the pay committees for allowing “accelerated” final salary pension contributions, which allow executive directors to “buy” extra pension years with huge bonus payments.

The BP executive directors pension is an accelerated scheme that allows chairman Lord Browne and his colleagues to reach the maximum two-thirds of final salary in only 20 years, compared with the 40 years needed by other employees.

Lord Browne is currently in line to receive £944,000 a year from his £15m fund.

Unlike Mr FitzGerald and other executives in the top 10 – notably Sir Phil Watts of Shell – Lord Browne has been widely praised for improving the performance of his company. Mr FitzGerald retired from Unilever last year after the failure of his Path To Growth strategy to increase sales. It later emerged that he had been asked to step down and been awarded a pay-off of more than £1m.

Under Sir Phil’s leadership Shell was shaken by a crisis over the level of its reserves, which it eventually conceded had been overstated by some 25%. Investors were shocked to read a leaked email from former exploration boss Walter van de Vijver to Sir Phil, the former chairman, in which he said: “I am becoming sick and tired about lying about the extent of our reserves issues.”

http://www.guardian.co.uk/business/story/0,,1542098,00.html

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

0 Comments on “Generous pension pots for the board while occupational schemes face shortfall”

Leave a Comment

%d bloggers like this: