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£250bn M&G Boss: Increase Pay And End Bonuses

£250bn M&G Boss: Increase Pay And End Bonuses

Britain's biggest companies should hand top executives a big increase in their basic pay while abolishing annual bonus awards, according to the head of one of the City's leading fund managers.

Sky News can reveal that Michael McLintock, chief executive of M&G Investments - which manages roughly £250bn of investors' money - made the proposal during a private meeting with other asset management bosses earlier this month.

Sources familiar with the discussion said Mr McLintock also floated the idea that public companies should replace long-term incentive share awards with restricted stock which the recipients would be obliged to retain for ten years.

The radical suggestions are expected to ignite huge debate across the City at a time when concern about executive pay levels and complexity has re-emerged as a major issue for fund managers and public company directors.

Mr McLintock's intervention is particularly significant because of his status in the asset management industry.

M&G, which sponsors the annual Chelsea Flower Show, is owned by Prudential, the FTSE-100 insurance group, and holds major positions in most of the UK's biggest listed companies.

The idea of scrapping annual bonuses, which can often reach multiples of an executive's basic salary, is likely to be welcomed by campaigners against high pay.

More contentious, though, would be the notion of awarding fixed-pay rises to individuals who are already among the wealthiest in Britain.

Mr McLintock's proposals were raised as an idea for discussion rather than being a firm basis for M&G's future discussions with companies in which it is a shareholder, according to one insider.

They were presented at a time when another major review of boardroom pay, spearheaded by the Investment Association - from which M&G recently resigned as a member - is drawing up ideas for reform.

The Executive Remuneration Working Group includes some of the biggest names in the City, including Nigel Wilson, chief executive of Legal & General, which owns the FTSE-100’s biggest single institutional investor.

It also comprises Helena Morrissey, the Investment Association’s chair; David Tyler, the chairman of J Sainsbury; Edi Truell, pensions adviser to Boris Johnson, the London Mayor; and Russell King, who chairs the remuneration committees at Aggreko and Spectris.

Their work, which will produce recommendations next year, could result in an overhaul of the way Britain’s top public company bosses are paid, with investors increasingly concerned that the complexity of remuneration schemes is obscuring the proper scrutiny of their performance.

The committee will look at abolishing LTIPs, adopting a uniform approach to long-term incentive plans which consists of fixed vesting periods and clawback policies, and which sets out the maximum value of awards at the point at which they pay out to executives.

The initiative comes just over three years after the 'Shareholder Spring' of 2012 resulted in the ousting of chief executives of companies including Aviva and Trinity Mirror following investor revolts over their pay packages.

The series of rebellions prompted Sir Vince Cable, the then business secretary, to introduce binding votes on companies' pay policies, although votes on the previous year's remuneration reports remain advisory.

However, the reforms have not curbed the flow of shareholder anger over boardroom pay, with companies such as BG Group, Man Group and RSA all suffering substantial rebellions at their annual meetings this year.

Research by the High Pay Centre has shown that the average pay of FTSE-100 chief executives soared from about £1m in 1998 to almost £5m last year, with much of the increase attributable to long-term share awards.

Individual fund managers such as Fidelity have called for companies to introduce longer periods before share awards vest, and have begun voting against boards whose remuneration policies do not comply.

An M&G spokesman declined to comment on Mr McLintock's proposals.