Centrica To Pay New Boss Less Than Predecessor
Britain's biggest energy supplier has struck a deal to pay its new chief executive less than his predecessor as it seeks to avoid igniting a new political row about the sector.
Sky News has learnt that Centrica, the owner of British Gas, is poised to announce within days that Iain Conn, who will be installed as the company's new boss this week, will earn both a lower base salary and overall potential reward package than Sam Laidlaw.
Mr Conn's remuneration package will nevertheless be substantial.
City sources said on Tuesday that he would be paid an annual salary of just over £900,000, compared to Mr Laidlaw's base salary of £950,000.
The new chief executive will also be eligible for a share incentive award in his first year at Centrica worth the same amount as his basic pay, which would be deferred until 2016, they said.
Further long-term share awards could also be quantified, although one fund management source said Mr Conn's maximum potential reward would be "considerably lower" than Mr Laidlaw's prospective £6.969m.
Leading shareholders in Centrica are understood to have been briefed on the proposals in the last few days, with an announcement confirming Mr Conn's arrival expected at or before its half-year results on Thursday.
Future awards are likely to be finalised ahead of Centrica's annual meeting next year, as part of a scheduled review of the company's remuneration policies.
People close to the situation said the decision to pay Mr Conn less than Mr Laidlaw reflected the fact that it would be the incoming boss's first job as a FTSE-100 chief executive, as well as the determination of Centrica's board to avoid a further political row.
BP confirmed last week that Mr Conn was leaving after almost 30 years, including a decade on the board.
The oil giant said it had decided to treat him as a "good leaver", meaning he would continue to be eligible for share awards accrued during his career there.
While these theoretically could have been worth more than £15m, as revealed by Sky News in May, their eventual value is likely to be closer to £5m.
Mr Conn will join Centrica at a challenging time, with the Competition and Markets Authority about to launch a full probe of the industry and Ed Miliband, the Labour leader, pledging a price freeze if his party wins next May's general election.
Mr Laidlaw could have earned almost £7m last year, but received less than a third of that sum after donating his £851,000 bonus to charity because of the ongoing row over energy prices.
The new chief executive's other priority will be to identify a new finance director and leadership team for British Gas.
Analysts at Royal Bank of Canada said they expected that the combination of warm weather in the UK, negative publicity and greater competition would result in a 25% fall in profits at British Gas's residential arm.
"On a (year-on-year) basis North American activities are forecast to fare even worse, with polar vortex costs and a margin squeeze in residential energy likely to lead to a fall in [pre-tax profit] of over 50%.
"Overall, we expect a decline in all seven operating divisions of (Centrica) in the H1 results."