AstraZeneca shareholders have approved a potential £1.8mn pay rise for Chief Executive Pascal Soriot, despite a significant investor revolt due to the "excessive" increase. The new policy allows Soriot to earn annual incentive payments worth up to 850% of his almost £1.5mn base salary, compared to the previous maximum of 650%. 36% of shareholders voted against the plans, reflecting tension between UK companies and shareholders accustomed to lower executive payments. Leading shareholders welcomed the pay rise, arguing that Soriot was "massively underpaid" given the company's performance and competition with high-paying US rivals.
Key Takeaways
- AstraZeneca approved a potential £1.8mn pay rise for CEO Pascal Soriot amidst significant investor revolt.
- Shareholders opposed the raise with almost 36% voting against the plans and 40% opposing a pay package increase in 2021.
- The tension between UK companies and shareholders highlights the struggle to compete with high-paying US rivals in terms of executive compensation.
- Leading shareholders welcomed the pay rise, emphasizing that Soriot was "massively underpaid" given the company's performance under his watch.
- AstraZeneca justified the changes by emphasizing the need to be competitive in the global market for talent, particularly in comparison to US counterparts.
News Content
AstraZeneca shareholders approved a potential £1.8mn pay rise for chief executive Pascal Soriot, despite a significant investor revolt against the increase. A large portion of shareholders voted against the plans, which would allow Soriot to earn annual incentive payments worth up to 850 per cent of his base salary, up from 650 per cent. The approval follows tension between UK companies seeking to compete with high-paying US rivals and shareholder bases accustomed to lower executive payments.
The increase in the dividend payment is intended to compensate for lower shareholder returns compared to the steady growth over the past five years, during which shares rose 78 per cent. AstraZeneca’s share price has fallen more than 8 per cent in the past year, and the company's first unanticipated rise in the dividend payment per share resulted in a 2.3 per cent increase in shares on Thursday.
Analysis
AstraZeneca's approval of a potential £1.8mn pay rise for its CEO, Pascal Soriot, signals a clash between UK companies and shareholders. The tension reflects the challenge of competing with high-paying US rivals while satisfying more restrained shareholder expectations. The increased dividend payment aims to offset lower shareholder returns amidst a recent 8% share price decline. Short-term consequences include shareholder dissent and potential loss of investor confidence, while long-term implications may involve negative impact on company performance and executive compensation norms, affecting AstraZeneca's standing in the pharmaceutical industry and its relationships with investors and competitors.
Did You Know?
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Annual Incentive Payments: These are extra payments given to top executives based on the company's performance and the achievement of predetermined goals. In the case of AstraZeneca, the potential increase in the chief executive's annual incentive payments caused a significant investor revolt.
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Shareholder Returns: This refers to the financial benefits (such as dividends and capital gains) that shareholders receive from owning a company's stock. AstraZeneca's decision to increase the dividend payment was intended to compensate for lower shareholder returns, which had been affected by the company's falling share price despite previous growth.
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UK-US Executive Payments Comparison: The tension between UK companies and their shareholders stems from the desire to compete with high-paying US rivals while managing shareholder expectations accustomed to lower executive payments. This disparity in compensation practices can generate disagreement and potentially lead to investor revolt, as seen in the case of Pascal Soriot's potential pay rise at AstraZeneca.