BG vote against £12m share award may make a Norwegian blue

Desperate times call for desperate measures. How else to interpret the crude insinuation from BG Group that its newly anointed chief executive might not join if investors vote down a one-off share award worth £12m?

 

The FTSE 100 oil producer certainly falls into the camp signposted “urgent need”, which explains why the lavish pay deal handed to Statoil’s Helge Lund was accompanied by such a plaintive exhortation to approve it.

 

Lund – if he does take over from Chris Finlayson – will undoubtedly inherit a mess. True, it’s one not entirely of the last chief executive’s making, and it has certainly been exacerbated by the sliding oil price.

 

But the view of some leading investors is that despite the company’s predicament, they remain unconvinced by BG’s method of trying to justify a package that could be worth about £14m annually (the £12m share award is on top of that).

 

They have a point. It’s less than six months since BG shareholders approved the company’s future pay policy with a 93.7 per cent vote in favour.

 

It’s not as if the golden hello is required to compensate Lund for income forfeited elsewhere, either – he’ll be earning up to seven times more than he did in Norway.

 

Last week’s tweaks to the terms of his annual LTIPs look like a clumsily half-hearted gesture, rather than a meaningful effort to heed investor concerns.

 

Sensibly, BG has left the door ajar to a further recalibration of the long-term share plan. 

 

That could offer it a final chance to win over shareholders even after the voting recommendations of ISS and other proxy advisers emerge in the coming days.

 

Even so, there remain a couple of important questions to which BG shareholders deserve unambiguous answers.

 

The first is whether Lund will join the company if the one-off share award is rejected; and if the answer to that is yes, who thought that blackmailing shareholders by presenting the opposite impression figured that it was a good way to begin repairing relations with investors?

 

Few people know the Tesco boardroom better than Patricia Tehan, the archetypically discreet FTSE 100 headhunter.

 

Her firm, The Lygon Partnership, placed Sir Richard Broadbent in his berth as the grocer’s chairman, and it has been identifying non-executive directors for a board short on retail experience.

 

Nevertheless, it makes sense that Tesco’s board should turn elsewhere to find Sir Richard’s successor – and not only because his four-year tenure has been less than an unmitigated success.

 

Just like other corporate advisers, headhunters can find themselves hidebound by group-think which serves them better than it does their clients’ shareholders.

 

Headhunting sources now tell me that the company has indeed appointed another firm to oversee the process. Whether that is (as rumoured) Jan Hall, whose JCA Group has become a powerful boardroom player, or someone else, it might not be a bad idea for Tesco to disclose its choice publicly.

 

Perhaps it should be known as the “John Lewis deadline”: no sooner had Monty the Penguin made his debut on British television screens in the retailer’s Christmas advert than the City’s float market became as dormant as a grandparent after too many glasses of mulled wine.

 

Virgin Money might have sacrificed some value by squeezing through the pre-Monty window, but at least it made it on to the stock market.

 

I understand others, including Afilias, an internet domain name provider which was being taken public by Numis, haven’t been so lucky. This year’s turkey will be a distant memory before it gets a chance to revive its deal.