Shareholder revolt over Standard Life Aberdeen CFO pay
FTSE 100 asset management company Standard Life Aberdeen has seen a significant shareholder revolt over its planned pay package for Stephanie Bruce, a former PwC partner due to join as its new chief financial officer (CFO) next month, with 42% voting against the remuneration report in one of the largest such AGM protests to date
15 May 2019
Bruce was appointed in March to succeed Bill Rattray who is set to retire at the end of May after 34 years. At the time, Standard Life Aberdeen said her basic annual salary would be £525,000, and under the company’s executive incentive plan, she would be entitled to bonuses paid annually subject to performance.
The maximum level of bonus payable to Bruce would be 350% of salary with a minimum of 75% deferred and subject to performance underpins for at least three years.
In addition the asset manager said it would pay Bruce a one-off award in the form of shares in the company worth £750,000 in connection with her appointment as CFO, to smooth her transition from a partnership model of remuneration.
Standard Life Aberdeen said: ‘This is in recognition of the way in which the composition of Stephanie's remuneration will change on joining the company in that she will be transitioning from a professional services firm where her remuneration was paid under a partnership model and was delivered in cash, to a listed company where a greater proportion of her remuneration will be variable pay in the form of equity awards with underpins and deferral features.’
The shares are to vest in three equal tranches on the first, second, third anniversaries of the award, with the company saying the proposal ‘is intended to ensure that Stephanie's interests are aligned with those of the company's shareholders from the outset.’
Prior to the AGM, proxy advisers Glass Lewis and Institutional Shareholder Services voiced disapproval of the pay increase and one-off recruitment award, arguing they should reflect performance. In response, Standard Life Aberdeen introduced requirements for Bruce to achieve savings of £175m in order to receive two-thirds of the total and £230m of cost cutting over three years to gain the full amount.
However, at the AGM only 57.98% of shareholders voted to approve the directors' remuneration report, excluding the remuneration policy, while all other resolutions were passed overwhelmingly. In a statement, Standard Life Aberdeen acknowledged the ‘significant’ percentage of votes cast against the resolution, and pointed out it had applied performance conditions to the award following feedback from institutional shareholders.
The company said: ‘Stephanie Bruce is an outstanding addition to our executive team at Standard Life Aberdeen, as our shareholders have acknowledged in their overwhelming endorsement of her appointment as CFO.
‘The reason we made this award, was to allow us to attract a talented senior executive from outside of the investment management industry who was previously remunerated on a comparatively consistent annual reward package, without the significant deferral arrangements we apply.
‘In the coming months, we will continue to engage with shareholders on the concerns raised on this resolution. In accordance with the UK corporate governance code, we will publish an update on that engagement within six months of the AGM.’
Bruce, who is a member of ICAS, joined PwC in 1990, becoming partner in 2002. Her most recent role is head of financial services assurance UK and since 2016 she has also been head of financial series for the UK regions.
Bruce was lead audit partner for Standard Life for five years until 2017, when the company merged with Aberdeen Asset Management and auditor rotation requirements saw the company swap PwC for KPMG after 22 years.