Prudential PLC PRU

DJ UPDATE: Prudential To Study Remuneration As 30% Reject Pay Report

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  By Vladimir Guevarra 
  Of DOW JONES NEWSWIRES 
 

LONDON (Dow Jones)--Prudential PLC (PRU.LN), the U.K.'s largest insurer by market capitalization, said Thursday that it will review its pay structure after some 30% of voting shareholders in the company's annual general meeting voted against Prudential's remuneration report.

The non-binding vote, which contrasts with the 91% approval last year, comes after the company last year paid GBP7.6 million to Michael McLintock, chief executive of Prudential's asset management arm M&G Investments.

It also comes after shareholder advisory group ISS earlier this month told Prudential shareholders to reject the remuneration report.

Last week, majority of rival Aviva PLC (AV) shareholders rejected their company's remuneration report, with many complaining of what they saw was excessive pay despite a massive fall in share price over the past five years.

The votes at Prudential and Aviva come amid a growing backdrop of more vocal shareholder activism--dubbed "shareholder spring"--against excessive pay, especially in banks and other financial institutions.

In its report, ISS noted that Prudential's remuneration committee "gave double-digit salary increases to, and increased the bonus and long-term incentive potential for, multiple executive directors."

McLintock's 2011 total remuneration, including releases from the long-term incentive plan, is 41% higher than the GBP5.4 million he received in 2010, which in turn is 14% higher than the GBP4.73 million he got in 2009.

Last year, M&G had an operating profit of GBP301 million, up 22% from a year earlier, and forming roughly 15% of Prudential's operating profit. It had assets under management worth GBP201 billion at end-2011.

McLintock's pay overshadowed the GBP4.72 million paid to Prudential CEO Tidjane Thiam. That pay to Thiam was 3% lower than the GBP4.86 million he received in 2010.

ISS also said: "The [remuneration] committee moved the goalposts of one executive director's long-term incentives two years into a three-year performance period by applying changes to its performance criteria retrospectively, which resulted in the vesting of a high proportion of those awards." It was referring to Barry Stowe, head of Prudential's operations in Asia.

ISS said that "retrospectively switching performance hurdles in the middle, and especially towards the end, of a performance cycle is generally inappropriate."

"Such an action undermines the credibility of a long-term incentive scheme, especially when it results in large payouts, as it suggests the remuneration committee will use its discretion to unduly benefit a plan participant," it said.

Stowe had total remuneration last year of GBP4.65 million, up from GBP3.1 million in 2010.

Reacting to the vote, Chairman Harvey McGrath said: "We will, of course, engage with shareholders to understand their concerns and to consult with them on how best to structure our remuneration."

"We remain committed to the principle that remuneration should reflect success in delivering results for shareholders," he said.

McGrath also said majority of Prudential's largest shareholders have expressed "their full confidence in and support for the management of the group and our strategy."

- By Vladimir Guevarra, Dow Jones Newswires. Tel. +44 (0) 2078429486, vladimir.guevarra@dowjones.com

(END) Dow Jones Newswires

May 17, 2012 10:31 ET (14:31 GMT)

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