CAIRN Energy is facing fresh controversy about executive pay after a corporate governance specialist voiced renewed criticisms of the oil and gas firm's executive pay policies.
In a report prepared ahead of Cairn Energy's general meeting tomorrow, Manifest highlighted wide-ranging concerns about board remuneration policies at the company, which it reckons are too generous.
"Total remuneration is considered to be positioned above expectations given the company's size and scale, its sector and its performance," says Manifest.
The organisation awards Cairn the same grade for its pay policies (D) as it awarded to Barclays, which was embarrassed last month when almost one-third of shareholders failed to back its directors' pay report.
Manifest's verdict will make uncomfortable reading for Cairn Energy, after the company scrapped plans to pay a big one-off bonus to its founder Sir Bill Gammell in January following vocal opposition from some shareholders.
This came after The Herald revealed that Manifest, which advises a range of major investors on voting policies, had questioned the proposal to pay Sir Bill big one-off awards to compensate him for moving from the chief executive's job to the chairmanship, and reward him for completing the $6 billion sale of the bulk of Cairn's Indian business to Vedanta.
Cairn may be concerned it risks becoming caught up in the backlash among investors against what are perceived to be excessive pay packages.
A series of companies have faced embarrassing reverses in general meeting votes on their remuneration policies in what has become known as the shareholder spring.
Following its decision to scrap plans to award Sir Bill share options worth £2.5 million, Cairn said it would consult shareholders in an attempt to draw a line under the controversy.
However, in its report, Manifest draws attention to the £1.4m payments for loss of office paid to Sir Bill last year. Among other matters, the report criticises Cairn's bonus policy.
It says: "The historic payout levels, when viewed against company performance, suggests that stretching bonus targets have generally not been set."
The report adds: "There may be concerns relating to the payout level given the company's performance."
Cairn Energy paid bonuses totalling £1.05m to three executive directors last year. The new chief executive Simon Thomson got £350,000.
Manifest also noted that the company made an increased operating loss of $1.1bn. This reflected the costs of drilling off Greenland, where the company has not made any commercial finds.
However Cairn made $4.6bn profit after tax, including the gain on the sale of the Indian business.
The company has returned $4.5bn to shareholders in the past five years.
A spokesperson for Cairn Energy said: "Cairn is committed to listening closely to shareholders and operating to the best standards of corporate governance. For example, this year we acted quickly and decisively when shareholders made their views known on the proposed share award to Sir Bill Gammell, and withdrew the motion.
"We maintain extensive dialogue with our shareholders to fully appreciate and understand any concerns."
Manifest grades remuneration reports from A to F, where F is the lowest grade.
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