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Categorized | Insurance

Aviva faces pressure on pay plans

Posted on April 30, 2012

Andrew Moss of Aviva

Leading shareholders in Aviva have warned that the insurer still faces significant opposition to its pay plans and leadership even after its chief executive waived his salary increase.

Andrew Moss, who last year received £2.69m in salary and bonuses, made a concession to investors unhappy with the group’s performance by turning down a £46,000 pay rise.

    But several leading institutional investors said they remained dissatisfied, saying the pay revolt was a sign of broader concerns about the company’s performance.

    “No-one supports Moss,” said a top 10 shareholder.

    Aviva is undergoing another shake-up under Mr Moss, who is under pressure to improve the group’s performance.

    The insurer has lined up Goldman Sachs to advise on a possible sale of its US business, people familiar with the matter told the Financial Times on Monday.

    Aviva is the latest company to come under pressure from shareholders over pay.

    Nearly a third of Barclays shareholders failed to support the bank’s pay report at its annual meeting last week and in the US investors have voted down pay policies at a growing list of companies including at Citigroup.

    Mr Moss had been awarded a 4.8 per cent increase to his base salary of £960,000, which Aviva said reflected “his performance, experience and contribution since his appointment”.

    The Aviva chief’s pay, excluding a long-term share incentive plan worth as much as £3.39m, climbed 8.5 per cent in 2011 – a year in which shares in the FTSE 100 insurer lost about a quarter of their value.

    One influential shareholder said: “In the context of concerns about performance of the group and the executive team, why on earth did the remuneration propose a such a rise for the CEO?

    “The response was universal criticism. It demonstrates … a wider point – how poorly some remuneration committees are working.”

    Yet much of the shareholder concern about Aviva’s remuneration policy was directed against plans to pay Trevor Matthews, who was brought in to run its UK business last year, about £2.5m.

    Aviva is not changing the arrangement for Mr Matthews, who is taking on further responsibility, but said it would review how it would “compensate future joining executives for the loss of entitlement from their previous role”.

    Another top 10 shareholder said: “I would be surprised if Moss is still there in a year’s time.”

    In a statement, Scott Wheway, chairman of Aviva’s compensation committee, said: “We take the views of our shareholders seriously.”

    He added: “A number of shareholders have indicated that they would like to see a different approach to the way we compensate senior directors on recruitment and an even closer correlation between our pay packages and shareholder returns.”

    John McFarlane is due to replace Lord Sharman of Redlynch as chairman at the end of June.

    Aviva shares closed down 8.6p or 2.7 per cent at 308.1p.

    Additional reporting by Mark Wembridge