BG investors protest over Helge Lund's pay

Investors in BG Group, the UK-based oil and gas producer, have rebelled against a multimillion pound pay deal for Helge Lund, its new chief executive, after an annual meeting where the chairman admitted misjudging public reaction.

Nearly 18 per cent of votes were cast against BG's remuneration report and there was also a sizeable protest against Sir John Hood, chairman of the remuneration committee. Some 13.5 per cent of votes were cast against his re-election to the board.

Mr Lund, former chief executive of Statoil, could be in line for a payout of up to £28m after BG agreed last month to a £55bn takeover by Royal Dutch Shell, just eight weeks after he arrived to turn round the group.

One shareholder, Mark Bentley, representing the small investors' group ShareSoc, described the possible award for Mr Lund as "an outrageous sum in the current environment" and "vastly greater" than his pay at Statoil.

"It's a contribution to the ratcheting up in executive pay across FTSE 100 companies," he said.

Earning a round of applause from other investors present, he added: "I really think the remuneration committee has let shareholders and UK plc down in agreeing this massive package for our CEO and I would request an apology from our remuneration committee."

Andrew Gould, BG chairman, defended the terms of the deal, which was revised down in December after a shareholder backlash.

"The board wanted to attract the best possible executive to head BG," Mr Gould said, adding that the remuneration package was "competitive".

He did not apologise, but conceded that the board had misjudged "the amount of public interest and shareholder angst that the package we recommended caused and, as you remember, we brought that package back".

"If we misjudged something, we misjudged the public reaction to it," he said.

The decision to approve the pay deal was taken by the board as a whole.

Mr Lund admitted to "mixed emotions" over the proposed offer from Shell, saying the takeover "was not in my mind when I joined the company".

Assuming he stays until the probable closing of the takeover by Shell early next year, Mr Lund will be well remunerated for his short stint in charge.

He will receive a base salary of £1.5m and a cash payment in lieu of a pension equivalent to 30 per cent of his salary, and a short-term bonus worth up to double his salary for achieving certain targets.

The revised pay package meant that, under the company's long-term incentive plan, he also received an initial award of shares, worth £10.6m in February, and an annual incentive plan grant with a face value of £9m.

The size of his bonus will be determined by five elements: earnings per share, return on capital employed, project performance, health and safety, and individual performance.

The share awards under the longer-term incentive plan are dependent on three factors. Half of the assessment is total shareholder return, one quarter is earnings before interest, tax, depreciation and amortisation and a quarter return on average capital employed. Sir John told shareholders the board would make a judgment on the size of the bonus and share awards.

"That is something I am not, the committee is not, permitted to comment on at this time," he said.

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