Newspaper article The Evening Standard (London, England)

A Myners Matter of the Icing on the mmO2 Icing

Newspaper article The Evening Standard (London, England)

A Myners Matter of the Icing on the mmO2 Icing

Article excerpt


TODAY marks the formal separation of BT from its mobile phone arm, the eccentrically-named mmO2. The new entity's chairman David Varney and his chief executive Peter Erskine are in line for transaction bonuses of around [pound]150,000 - on top of salaries of [pound]500,000 apiece and performance related extras that could amount to another [pound]1.5 million each.

Shareholders do not like transaction bonuses. They made that clear when Vodafone gave Sir Christopher Gent one for taking over Mannesmann and later when Royal Bank of Scotland dished out presents to a host of senior people for helping to buy NatWest.

But BT does not seem too bothered. Varney's contract states he is entitled to his money once the mmO2 demerger is completed. A half-hearted effort at appeasement has been made on Erskine's bonus in that it will not be paid until the new business has been listed for at least six months and the amount will depend on how the remuneration committee thinks he has done.

This is not good enough.

Executives are paid to do a job and receive options and performance-related bonuses to make them do it better.

Transaction bonuses are like the icing on the icing on the cake: too rich and not necessary. They are particularly irksome when paid the instant a deal is done, well before there is any evidence of its merits.

Nor is six months long enough to make a serious assessment.

If shareholders wish to protest against mmO2's pay structure, they can write to the chairman. At corporate governance level, many institutions have indicated they would like to do this. Whether the letters are ever written is an open question, however. Large companies-have large pots of pension money that need to be managed and executives running fund management firms know that overt criticism of a company's corporate governance will not help to win its pension business. …

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