BG revises new chief's pay award after shareholder revolt

Helge Lund has been widely praised for his transformation of Statoil

Oil and gas giant BG Group has revised the pay award granted to its incoming chief executive Helge Lund after some shareholders threatened a revolt over a £12m upfront shares bonus.

This upfront package has now been scrapped, and more of Mr Lund's pay will be based on performance.

A "significant number of shareholders" questioned Mr Lund's pay award BG said.

Also, the Institute of Directors (IoD) took the unusual step of criticising the pay award last week.

But on Monday, Simon Walker, director general of the IoD, welcomed the revised deal, saying the company had "listened to the concerns of its shareholders."

Sacha Sadan, director of corporate governance at Legal & General Investment Management, added: "We are encouraged to see BG responding positively to shareholders' concerns. As long term engaged investors we look forward to the new CEO joining and creating shareholder value for all."

BG had initially agreed to pay Mr Lund a basic salary of £1.5m, plus £450,000 a year in lieu of pension contributions. He was also granted up to £480,000 to relocate to the UK from Norway, where he was chief executive of oil firm Statoil.

In addition to his basic salary, Mr Lund's contract included two different bonuses: one in cash up to a value of £3m a year, and one in shares, up to a value of six times his basic salary, equal to £9m.

Performance based

In total, Mr Lund could have earned up to £12m a year in bonus awards, on top of the £12m initial shares bonus he would have received on taking up his post as chief executive in March 2015 and base annual salary of £1.95m.

It would have meant a potential pay package in Mr Lund's first year of nearly £26m.

BG said on Monday that the initial shares bonus had been scrapped after shareholder's raised concerns that the pay award was contrary to the company's "remuneration policy", which had been agreed six months earlier at a shareholder meeting.

Under the new remuneration package, Mr Lund can earn up to £10.6m in shares over the next five years in place of the initial £12m shares award, but only if certain specific performance targets are achieved, including that BG's share price outperforms its rivals.

BG said that in reality it expects this bonus to amount to £4.7m, which over five years would add £960,000 to Mr Lund's annual salary.

The oil and gas firm added that 62% of Mr Lund's salary in the first year was now performance based, and that Mr Lund had indicated that he intended to hold his shares for the duration of his time as chief executive.

None of the shares bonuses will vest for five years and Mr Lund will not receive the first shares bonus until 2018.

'Constructive role'

BG said in its statement that a "significant number of shareholders questioned the structure of the package, in particular whether it was appropriate to go outside the remuneration policy approved by shareholders earlier this year.

"Both the board and Mr Lund recognise and wish to respond to shareholder concerns. The board welcomes the active and constructive role played by Mr Lund in revising the remuneration package so that all elements fall entirely within the company's current policy."

Mr Walker said: "The Institute of Directors applauds the revisions to its CEO's proposed remuneration. Mr Lund's pay now conforms with the policy guidelines agreed by shareholders in May and is subject to quantifiable performance targets," he added.

"While substantial, the total remuneration is reduced and now falls within proper limits for a company of BG's size and international importance. We continue to welcome Helge Lund's appointment and wish him and BG well in the challenges they face."