Aviva backtracks on plan to boost pay for top executives

Aviva has completed the UK insurance industry's biggest deal since 2000 with its acquisition of Friends Life, but the transaction was overshadowed on Friday by concerns over executive pay at the enlarged group.

The FTSE 100 insurer has backtracked on its plan to boost potential remuneration for its leading managers on the grounds they will be leading a bigger company.

ISS, an influential shareholder voting agency, privately took issue with Aviva this week over its proposal to increase the maximum remuneration of Mark Wilson, chief executive, and Tom Stoddard, finance director.

Aviva had justified the increase "to help with retention during this critical time, strategically and in relation to the objectives of the proposed Friends Life transaction."

The tie-up with Friends Life - whose shares ceased trading on the London Stock Exchange on Friday - is the largest deal in the sector since the CGU and Norwich Union merger almost 15 years ago, which created Aviva.

Aviva reversed course on Friday on the pay increase because of the objections from ISS, which advises about 1,600 institutions globally on corporate governance matters.

Insiders said that although the board disagreed with ISS, Mr Wilson was keen not to make pay a flash point and was willing to back down to avoid the risk of a public dispute.

Shares in the newly-enlarged Aviva are set to begin trading on Monday after investors in both sets of companies voted overwhelmingly in favour of the tie-up last month.

The enlarged group will have 16m UK customers and £340bn of assets under management. But the deal is set to result in 1,500 job losses as the insurer targets £225m of annual cost savings.

Under the original pay plan, Mr Wilson would have been able to earn as much as 3.5 times his annual salary in shares under a performance-based long-term incentive plan (LTIP) - up from three times. This could increase his total package by £500,000.

Patricia Cross, who chairs Aviva's remuneration committee, said in a statement on Friday that the insurer had received "significant" support from investors for the plan.

She added the insurer was "disappointed" by the objections from an unnamed shareholder voting agency and highlighted "tangible progress made by the management team and the award being within the company's remuneration policy".

ISS refused to say on what grounds it took issue with the proposal, adding it had yet to provide a report to its clients.

Pay has been a sensitive subject at Aviva after a shareholder revolt ousted Mr Wilson's predecessor, Andrew Moss.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation