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Pay revolt threat to Melrose executives

MELROSE Resources faces a revolt on executive pay at its annual general meeting today in the latest expression of investor unease about boardroom pay levels, dubbed the shareholder spring.

REMUNERAtion: Experts say Melrose chief executive David Thomas's £402,000 salary may be excessive.

The Edinburgh-based oil and gas firm has been criticised by a prominent corporate governance specialist, which is concerned that executives may be being overpaid.

In a report on Melrose Resources prepared ahead of the AGM, Manifest tells clients: "Total [potential] remuneration is considered to be positioned above expectations given the company's size and scale, its sector and its performance."

The organisation said the £402,000 salary paid to chief executive David Thomas "appears to be potentially excessive".

Manifest awards Melrose the same grade for its executive pay policies, D, as it gave to Cairn Energy, which suffered a 67% vote against its directors' remuneration report last month.

That vote followed revelations in The Herald that Manifest, which advises a range of major investors on voting policies, had expressed concern about board remuneration practices at Cairn.

Last month Aberdeen-based Faroe Petroleum moved to quell a shareholder rebellion at its general meeting by withdrawing a resolution to approve a new executive incentive plan which had drawn criticism from Manifest.

The organisation also highlights an apparent disconnect between executive pay levels at Melrose and the company's share price.

"Shareholders may wish to note that the company's share price has fallen by 70.5% over the last five financial years period whereas FTSE Small Cap Index (excluding investment trusts) has fallen by 43.6% over the same period," Manifest tells subscribers.

Melrose Resources has exploration and production interests in several countries including Egypt and Bulgaria. The London Stock Exchange-listed firm has a market capitalisation of £107 million.

Manifest adds: "The company pays out a relatively small portion of its profits as dividends."

In the report, Manifest highlights what it describes as a "significant and unexplained salary increase for the executive chairman", Robert Adair. Mr Adair received a salary of £295,000 in 2011, up 16% on the £254,000 in 2010. His total remuneration increased to £478,000 in 2011, from £436,000 in the preceding year.

Manifest noted that Mr Adair works 50% of full-time hours. Mr Adair owns 50.04% of Melrose Resources through his Skye Investments vehicle.

Mr Thomas was paid a salary of £402,000 in 2011 compared with £386,000 in the preceding year. His total remuneration rose to £630,000 from £575,000 in 2010.

A spokesman for Melrose Resources said: "We expect 90% to vote in favour of the remuneration report at the annual general meeting."

He said Melrose's remuneration committee is composed of three independent directors who take advice from external consultants. These benchmark all aspects of remuneration for executive directors against Melrose's peer group.

He added that Mr Adair received a 4% salary increase in 2011 that appeared inflated due to pension contributions.

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