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U.K. Investor Shake-ups Put CFOs in the Spotlight

Pay and performance questions have claimed CEO jobs at AstraZeneca and now Aviva, and finance chiefs have stepped into the breach.
Andrew Sawers, CFO.com | US
May 8, 2012

The emerging revolt over boardroom pay claimed a scalp today when the chief executive of Aviva, a British insurance group, departed "with immediate effect." Andrew Moss, who took up the chief executive role in 2007 after three years as CFO, departs in the wake of a shareholder uprising in which 54% of votes opposed adoption of the board's remuneration report at the annual general meeting on May 3.

Investors objected to the £2.69 million (3.34 million euros; $4.34 million) pay package Moss received in 2011, a year that saw the insurer's aftertax profit almost disappear to just £60 million (74 million euros; $97 million), down from £1.89 billion (2.34 billion euros; $3.05 billion) in 2010.

Deputy chairman John McFarlane, the onetime CEO of Australia and New Zealand Banking Group, has taken on Moss's responsibilities until a successor is appointed. In its statement, the company also said McFarlane has asked CFO Patrick Regan "to play a pivotal role across the group" because of "the imperative of improving financial performance."

To be sure, the vote on the Aviva remuneration report had no binding effect. But the embarrassment appears to have been too much for the company and was exacerbated by the fact that Aviva itself is a significant institutional investor known for its positive approach to corporate governance. It has approximately £400 billion (496 billion euros; $646 billion) of assets under management.

Recent weeks have also seen shareholder disquiet over boardroom pay at Barclays. More than a quarter of the company's shareholders opposed its remuneration report after the Association of British Insurers, an industry trade body, issued a so-called amber top notice. (Such  notices warn shareholders to be careful about voting in favor of a company.)

The notice drew members' attention to the remuneration of CEO Bob Diamond and CFO Chris Lucas. Both executives were paid bonuses toward the upper limit allowed by their contracts. That gave Diamond total pay of £6.3 million (7.8 million euros; $10.2 million) last year and Lucas £3.9 million (4.8 million euros; $6.3 million).

Diamond also benefited from a "tax equalization" component worth more than £5 million (6.2 million euros; $8.1 million) to compensate him for the effects of "double taxation" of his earnings as he relocated from the United States to the United Kingdom.

Further, Simon Lowth,  AstraZeneca's CFO,  was named to take the reins as interim CEO on June 1 after last month's announcement of the retirement of David Brennan, whose exit appears to have been precipitated by investors dissatisfied with the company's financial performance and strategic direction. Julie Brown, vice president of group finance, will become interim CFO on June 1.

These developments take place as shareholder activism gathers momentum. Earlier this month, Trinity Mirror, a U.K. newspaper publishing group, suddenly announced a week before its general meeting that chief executive Sly Bailey would leave the board at the end of the year. Institutional shareholders — including, ironically, Aviva — were angry at the £1.7 million  (2.1 million euros; $2.7 million) pay deal the company gave her while its shares were falling some 40% over the last year.

Elsewhere, significant minorities of shareholders voted against high-profile but nonbinding pay ballots at UBS and Credit Suisse. In April shareholders rejected a $15 million (11.5 million euros) package for Citigroup CEO Vikram Pandit.

Andrew Sawers is editor of CFO European Briefing, a CFO online publication.




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