Standard Chartered exec directors accept pay cuts following shareholder revolt

The Remuneration Committee of Standard Chartered has earlier today published an update regarding changes to executive director remuneration.

At the annual general meeting (AGM) held on May 8, 2019, resolution 4 on the directors’ remuneration policy received the support of 64% of shareholders. The UK Corporate Governance Code requires companies to provide an update within six months of an AGM where more than 20% of shareholders have voted against a resolution. Hence, today’s statement by the Remuneration Committee provided an update on the recent shareholder engagement.

Since the AGM, the Chair and members of the Committee and the Group Chairman engaged with shareholders that represent approximately 60% of Standard Chartered’s issued share capital, with the Investment Association that represents over 250 UK investment management firms and with other major shareholder advisory bodies.

At these meetings, the key views expressed were:

• The majority of shareholders support the existing overall quantum of total remuneration offered to the current executive directors in absolute terms and relative to peers. Notwithstanding this, they wish to see the concerns of other shareholders in relation to pension allowances resolved, whilst keeping the executive directors engaged and focused on the delivery of the strategy;
• Where shareholders had concerns, these primarily related to the lack of alignment between pension arrangements for incumbent executive directors with the wider workforce;
• Notwithstanding the executive directors’ contractual entitlements, a number of shareholders expect a reduction in pension for Standard Chartered’s current executive directors;
• Some shareholders expressed concerns that, while disclosure levels are generally good, the structure of salary and pension arrangements and how they align to the wider workforce and the UK;
• Corporate Governance Code was not as clearly explained as it could have been, leading to insufficient clarity.

The Committee concluded that Standard Chartered should implement a change to resolve concerns as swiftly as possible, with the Board, including the executive directors. The contractual terms and conditions for Bill Winters and Andy Halford will change and their pension allowance will reduce from 20% of salary to 10% of salary with effect from January 1, 2020. This aligns the executive directors’ pension arrangement with UK employees of Standard Chartered from the start of 2020.

The executive directors’ salaries are paid as a mixture of cash and shares to strengthen shareholder alignment and the pension allowance is set as a percentage of salary (both the cash and shares components). This is key to the alignment of the current executive directors’ remuneration to other UK employees. Pension allowances as a percentage of only part of salary would not be aligned to the wider workforce.

Changes to executive director remuneration include:

• Bill Winters’ pension allowance will reduce by 50% from £474,000 to £237,000 on 1 January 2020. Andy Halford’s pension allowance will reduce by 50% from £294,000 to £147,000 on 1 January 2020.
• Fixed pay (salary plus pension allowance) for the executive directors will reduce by 8%.
• Because the variable pay opportunity is a maximum of 200% of fixed pay in line with the regulatory definition, the reduction in pension allowance will result in a reduction in the variable pay opportunity for both executive directors.
• As a result of the changes, the target and maximum total remuneration opportunity (fixed pay plus the variable pay opportunity) for the executive directors will reduce by 8%.
• No compensation is being given to the executive directors for the reduction in their pension allowance.

Both executive directors have accepted this change.