THE chairman of Standard Life defended the company's executive pay policies in the face of a significant protest by investors and signalled that it would consider buying Scottish Widows if its rival is put up for sale.

Gerry Grimstone mounted a spirited defence of the boardroom pay practices at Edinburgh-based Standard Life in advance of a general meeting which featured a big protest vote on the issue.

Some 11.5% of votes cast by shareholders including institutions opposed approval of the directors’ remuneration report for 2010.

This showed that the life and pensions giant’s boardroom pay bill totalled £5.576m, including £2.8m bonuses but excluding conditional awards made under the Long Term Incentive Plan. David Nish, who became chief executive last year, earned £1.97m including a £1.1m bonus.

By contrast, in 1995 one of his predecessors Scott Bell earned £342,000 including a £51,000 bonus. In 2009, directors received pay and benefits worth £5.8m including bonuses totalling £2.9m.

A prominent corporate governance watchdog, PIRC, had recommended that shareholders oppose the 2010 report.

“We consider that combined bonus and share incentive awards made during the year were excessive,” it said. The organisation questioned the suitability of the revised performance conditions that apply to LTIP awards. A spokesman for PIRC said the “oppose” on the Standard Life remuneration report was double the average recorded in respect of a member of the blue chip FTSE-100 index last year.

However, asked to comment on PIRC’s criticisms, Mr Grimstone told The Herald: “I don’t think there’s a company in the country who PIRC wouldn’t find something wrong with their remuneration report and that’s PIRC’s prerogative to do that.

“We have a very independent remuneration committee and the job of the committee is to make sure that we pay our people fairly and we incentivise them to produce profits for shareholders and to work hard and we don’t spend a penny more on that than we need to.”

Pressed to respond to the claim that rewards were excessive, Mr Grimstone said: “We pay the absolute least that we need to in order to have the right people working for us ... We’re not doing anybody a service, our shareholders, our customers, our staff, if we don’t employ the right people.”

Mr Grimstone told the meeting that Standard Life has been making excellent progress under David Nish, who has completed one year of a three-year programme of change intended to position the company to achieve long-term growth.

There was no sign of unease about pay or strategic matters among the 100 or so investors at the thinly-attended AGM.

Asked by The Herald whether Standard Life would consider bidding for Scottish Widows should it be put up for sale by Lloyds Banking Group, Mr Grimstone said: “I can’t say... We’re perfectly happy as we are at the moment. Obviously, if any opportunity comes up we look at it but it’s nothing that we are engaged on at the moment because it’s not for sale yet.”

Regarding whether Standard Life might buy in the UK, Mr Grimstone said: “We always said we don’t close our minds to acquisition... Where we think there’s something to buy which adds on to our company, we do that.”

He distinguished the company from others that focus on achieving returns by consolidating different firms, saying: “There’s other people in the sector who make their living out of acquisitions: we’re not that, we run our business as is.”

However, he added: “If something comes up, you look at it. We have no kind of prejudgment about whether things like that would suit us or not.”

This suggests Standard Life is open-minded about bidding for Scottish Widows, although the prospect that big job losses would result in the enlarged business would concern politicians.

Mr Grimstone said he would give similar answers in respect of the Scottish Equitable business, which some sector watchers believe Aegon may offload.

A former senior Whitehall civil servant, Mr Grimstone said the Scottish National Party had won a momentous victory in the recent Scottish Parliament elections.

Asked whether Standard Life might think about leaving Scotland if the SNP Government introduced separate tax rates in Scotland, he said: “It would be wrong to single any one thing out. Whatever comes forward we will look at it and see what’s in our interests, as you would expect us to. That’s not just narrow self interest, it’s what’s in the interests of the shareholders, the customers and the employees.”

Noting that Standard Life is based in Scotland for pragmatic as well as historic reasons, he advised the SNP Government to engage with business.