Financial News

  • 27 March 2014, 11:01

Centrica Slashes Top Executives' Pay To 6.6m

The owner of British Gas will reveal this week that it slashed executive pay awards last year after a share price decline triggered partly by the intensifying political row over energy prices.

Sky News has learnt that Centrica will disclose in its 2013 annual report, to be published on Thursday, that it paid its top management roughly 60% less than the 16.4m they earned the year before.

Total pay for the company's executive directors, who included the former British Gas managing director Phil Bentley; the outgoing finance director, Nick Luff; and Sam Laidlaw, the chief executive, is understood to have fallen to 6.6m, a source said.

The company, which as the UK's largest gas and electricity supplier is facing growing political pressure to be broken up, will also confirm that Mr Laidlaw has donated his 2013 bonus award to charity.

Insiders said that Centrica's comparatively lacklustre performance in 2013, when British Gas reported a 6% fall in annual profit at its residential arm to 571m, had meant the group's long-term incentive awards from previous years had failed to vest.

The company's equity awards are linked to criteria such as earnings per share and share price performance.

The company's remuneration committee has also decided to reduce annual bonuses because of the lower share price and flat profits, with Chris Weston, who replaced Mr Bentley as British Gas's managing director, understood to have been awarded approximately 400,000.

Mr Laidlaw said last autumn that he would not accept an annual bonus - which is said by insiders to have been in the region of 800,000 - because of the ongoing controversy about energy prices.

"Just to continue in this world where households are under pressure, and assume it is business as normal, is not the way thoughtful remuneration committees think about it,'' he said in November.

All of the big six suppliers raised prices last autumn, blaming an increase in wholesale energy costs and Government-imposed green levies.

The relaxation of those levies by ministers failed to defuse political tensions, however, after some suppliers were accused of being slovenly in passing on the reduced costs to consumers.

The publication of Centrica's annual report will coincide with an expected decision by Ofgem and the Office of Fair Trading to refer the industry to the Competition Commission.

Such a move would be politically palatable for the Government, which was left wrong-footed last year by a pledge from Ed Miliband to freeze prices for 20 months if Labour wins next year's general election.

A full competition inquiry could take as long as 18 months.

Last month, Ed Davey, the Energy Secretary, paved the way for a referral in a letter to Ofgem.

"Clearly you will wish to consider whether [British Gas's position] is prima facie evidence of an issue in the market and so whether it merits a market investigation reference with the whole gamut of potential remedies that could follow, including a break-up of any companies found to have monopoly power to the detriment of the consumer," he wrote.

Separately, Centrica confirmed on Tuesday that it had a reached a deal to acquire some of the assets of Bord G? Energy, the retail arm of Ireland's state gas company.

Centrica declined to comment on the executive pay figures.