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Michael Fallon, the senior Conservative on the Treasury Select Committee, was today facing a backlash after approving a multi-million-pound bonus to a top City executive.
The MP for Sevenoaks backed a £4.52 million bonus for Terry Smith, chief executive of money broker Tullett Prebon, the firm where Fallon is a non-executive director and chairman of the remuneration committee.
Smith was also handed a £5.1 million share award after Tullett revenues soared by 25% last year and profits rose 36% to £155 million.
But the payout has been opposed by a group of shareholders and looks set to lead to a showdown at Tullett's annual meeting on Thursday.
It is awkward for Fallon, who is well respected on the Treasury Select Committee and has been a vocal critic of fat-cat pay, particularly the pension payments to former Royal Bank of Scotland chief executive Sir Fred Goodwin, who he has accused of destroying a once-great institution.
The Local Authority Pension Fund Forum, made up of 49 public-sector pension funds, called on its members to vote against the pay at Tullett.
It said: “There is more than ever a need to ensure a company's management focuses not only on the short term but also adopts a clearly defined approach to long-term value creation.”
The local authorities own less than 1% of Tullett shares but could be joined by institutional investors in opposing Smith's pay.
The Association of British Insurers has an “amber alert” on Tullett and has raised issues of its corporate governance.
LAPFF chairman Ian Greenwood wrote to Tullett chairman Keith Hamill in March setting out its concerns but has yet to receive a response.
Greenwood said: “The forum cannot support remuneration schemes that do not clearly link pay and performance, in particular when variable pay makes up a large proportion of total remuneration.
“Investors want to know not only what measure is used in general terms, but how this measure links to the company's strategy and how stringent performance targets are.”
Fallon, who earns £45,000 a year as a non-executive at Tullett, said in the firm's annual report that the remuneration committee “considered whether to take account of general public issues” such as fat-cat pay, but would “make decisions in accordance with the best interests of the company and its shareholders and in conformity with previous stated policies”.
Last year Fallon said: “Mega-bonuses, out of all proportion to ordinary earnings, destroy the social consensus on which a free economy depends.”
He has also called for banks to do “simple, straightfoward banking” where risks are assessed properly and bonuses tailored to performance.
Reader views (7)
Quote: Dave Davies, Basingstoke.
So what? This company is not state owned bank, its a private broker.
None of them were state owed a year ago; Dave.
That is how we tax payers have ended up paying for their greed etc.
If your in a pension fund, lets hope they don’t get yours as well; or we will end up bailing you out as well..
- Mickyinlondon, london
The fact is that you really don't need to pay these people these levels of salary and bonus. After all the company is not really producing anything else that any other bank can't create based upon shareholders ownership and shareholders capital
If the directors cared for the shareholders they would pay them well but not at this greedy and exorbitant level.
As a financial person and shareholder in the US investment banks, I quickly realised that shareholders were on a 'hiding for nothing' and it was 'heads they win and tails shareholders lose'.
Put a vote to shareholders and they could easily find someone able to do the same job for £500K to £750K. This is just greed.
NB And the answer lies in who is the major shareholder and who appointed Michael Fallon!
- Nick, St James SW1
"Tullett revenues soared by 25% last year and profits rose 36% to £155 million." Why not tell us how much was paid in tax by the company, its CEO and its employees and then tell me it's 'fat cat' pay.
- Peter Bench, London
Do these people never learn? I see the whole issue with Fred the Shred seems to have gone away. No further investigations! NEVER believe any of these sharks when they say there should be an independant investigation etc. They all cover each other's backsides, and nothing ever gets done about it. They wait long enough for something else to happen in the country and then they slip under the radar. Makes real mugs out of us.
- Maya, London
So what? This company is not state owned bank, its a private broker.
- Dave Davies, Basingstoke
The era of Nu Labour and it's shallow values must surely be over.
- Roz, France
If you vote Tory; you might as well vote New Labour; they are two peas in the same pod.
Vote against them all; vote for people of integrity and honesty; vote independent of the big two; or you will end up back at square one for the next five years.
Leopards never change their spots.
- Mickyinlondon, london
