THE chief executive of Faroe Petroleum could get share awards worth £1.6 million for this year under a proposed incentive scheme but the company has admitted some of the awards possible under a plan it withdrew last year were too large.
Graham Stewart could be entitled to share awards worth 375% of his £335,000 annual salary under the Faroe Petroleum Incentive Plan the company wants shareholders to approve at its annual general meeting next month.
Last May, Aberdeen-based Faroe ditched plans for a new exceptional performance incentive plan (EPIP) which could have seen Mr Stewart take a 1% stake in the firm following the so-called shareholder spring of investor unrest about executive pay.
Some shareholders and corporate governance experts criticised the scheme proposed last year for its generosity, dilution of existing investors, reliance on share price returns, and for potentially paying out after a takeover.
In the notice for this year's general meeting Faroe said its remuneration committee had completed a comprehensive review and remodelling of the proposals for the incentive plan.
The company said: "The Committee acknowledges that the proposed levels of award under the original EPIP were too large in some cases."
Maintaining that Faroe Petroleum's fully-funded drilling programme could result in a big increase in its scale, the company said it needed a new incentive plan to help retain key executives amid fierce competition for staff in the industry.
After consulting major shareholders, Faroe has proposed a plan under which all employees may be granted awards of nil cost options, which will vest after three years subject to conditions.
Executive directors and senior executives must hold any shares granted for two years after awards vest.
The chief executive will receive annual awards of up to 250% of salary. Other executive directors and senior executives could get shares worth 200% of their salaries.
A multiplier of up to 1.5 times may be applied to awards made to executive directors and senior executives providing "outstanding" levels of performance are delivered.
The boardroom pay bill fell by 14% at Faroe Petroleum last year although three directors received special bonuses totalling £167,000 following the withdrawal of the planned incentive scheme last year.
Faroe Petroleum's annual report shows directors of the firm shared remuneration totalling £1.55m in 2012, compared with £1.804 in the preceding year.
Mr Stewart's total remuneration fell by around 20%, to £505,000 from £628,000. His bonus fell from £293,000 in 2011 to £101,000 in 2012.
But Mr Stewart was awarded an additional payment of 20% of his £335,000 annual salary, worth £67,000, to invest in the company's shares in a move Faroe said was to compensate him for not receiving awards under two incentive schemes.
Chief operating officer Helge Hammer and finance director Iain Lanaghan were awarded £53,000 and £47,000 to invest in Faroe shares for the same reason.
"In 2012 no options were granted to the Executive Directors under the Faroe Petroleum 2003 Unapproved Share Option Scheme and following the withdrawal of the shareholder resolution to approve the proposed 2012 Exceptional Performance Incentive Plan the provisional awards have since lapsed," explained Faroe in the annual report.
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