The Edinburgh pensions and investment giant yesterday awarded Mr Nish 753,000 Standard Life shares which have a market value of £1.6 million at last night’s closing share price of 213.5p.
But under the terms of the long term incentive plan he will only be able to cash in the full award if he delivers operating profit growth of 24% a year until 2013.
This would take operating earnings to £800m, well ahead of the market consensus of £556m.
To receive even the minimum award, profit must be a consensus-beating £650m, equivalent to 15% annual growth.
If he succeeds in this aim it would also be reasonable to expect that Standard Life’s share price would have surged ahead from current levels, potentially netting Mr Nish a multi-million pound pay day.
The award appears to be a retort to City investors who sent the company’s shares down a painful 7% when it released its profit figures last month and have continued to view its paper with suspicion.
Standard Life’s operating profit for 2010 had risen to £425m from £399m a year earlier but investors were disappointed it did not match rival insurer Prudential’s 20% dividend hike.
Mr Nish has promised that by next year investors will start to see the benefits of his changes at the insurer, including a revamped management team, new products and the disposal of non-core assets such as its banking and healthcare businesses.
Standard Life’s annual report revealed that Mr Nish saw his pay package soar 66% last year to nearly £2m after he was promoted from finance director to chief executive.
Mr Nish took home a basic salary of £720,000, and a pension allowance of £179,000, with benefits such as private health cover. A bonus of nearly £1.1m, took his total to just under £2m.
This compared to the £1.2m package he got for 2009 when he was finance director under Sir Sandy Crombie.
He is to get a pension boost from this year after Standard Life agreed to up its contribution from 25% to 30% of his basic salary.
It has also handed pay rises to its executive team. Mr Nish’s basic salary has risen from £725,000 to £775,000.
This is 10.7% higher than his starting pay when he was appointed at the beginning of 2010.
Keith Skeoch, chief executive of Standard Life Investments, has received a 21.4% rise to £425,000, his first boost in five years, which Standard Life said was to reflect his performance in 2010 and his wider board duties.
Mr Skeoch’s earnings matched the amount taken home by his boss last year.
His basic pay of £369,000 was combined with an annual bonus of £1.4m and pension and benefits to take his total for 2010 to £1.9m. This was 10% down on the £2.1m package he got in 2009. Mr Skeoch trumped Mr Nish in long-term incentives.
He has been awarded a total of 825,000 shares under two separate incentive schemes with a combined paper value of £1.8m.
Standard Life’s shares gained 6.7p or 3.2% yesterday to close at 6.7p.