Aviva’s pay committee chair is reviewing how it ‘compensates’ directors on recruitment after it emerged that Trevor Matthews got a £470,000 cash payment after a month
Trevor Matthews’ contract to join Aviva as the £720,000-a-year head of its UK business must have been tricky to negotiate. How do we know? Because Aviva picked up Matthews’ bill for “professional fees” of £35,280 for “legal advice in connection with the terms of his employment.”
Set aside for a moment the small matter of whether Matthews should have paid his own way when switching employer and consider how much legal advice £35,280 buys. Even at the lucrative rate of, say, £250 an hour, that’s 141 hours’ worth. Can the negotiations really have been that fiendish?
From Matthews’ point of view, it was clearly money well spent since he secured a corker of a signing-on package to persuade him to leave Resolution and not to depart to Australia, as he had previously announced.
He got a £470,000 cash payment after a month at Aviva and was awarded shares worth £2.02m, where the only performance condition was to remain with his new employer for three years. No wonder some Aviva shareholders think the insurer could have tried harder.
Aviva seems miffed that anyone should think it has been overly generous: the remuneration committee thinks it offered an “appropriate” award. Nevertheless, Scott Wheway, chair of the pay committee, has been bounced into launching a review of how it “compensates” senior directors on recruitment.
That seems be an attempt to limit the level of shareholder dissent at the annual meeting. For good measure, chief executive Andrew Moss is giving up the increase of £46,000 in his annual salary. He’ll have to rub by on £960,000, a £480,000 pension contribution, and the chance to earn an annual bonus of £1.44m plus £2.6m of long-term incentive shares.
As with Barclays, 11th-hour tweaks in pay, plus pledges to listen harder to shareholders, probably will not quell the anger when it comes to the vote. The basic problem is similar: since 2008 shareholders have suffered a massive drop in dividend income, plus a substantial decline in the share price, yet boardroom pay practices continue as if nothing has changed.
Investors should offer this advice to new chairman John McFarlane for free: shareholder returns come first.