Rolls-Royce
Rolls-Royce boss Warren East’s pay packet more than halved in 2020 as the pandemic prompted the company to tear up traditional bonus plans.
The company’s share price has been hammered by Covid, following years of underperformance as a run of troubles hit its jet engines.
A new incentive scheme has less focus on the share price and instead concentrates on measures to get the FTSE 100 firm back on its feet.
Traditional forms of bonus schemes could lead to huge windfalls for executives if the share price surges as air travel unexpectedly recovers, lifting Rolls’ shares through actions beyond the controls of management.
Warren East
Mr East received a total of £1.1m in pay, benefits and pension last year, down from £2.5m in 2019, when £1.3m of bonus and incentive payments boosted his total remuneration. No bonuses were paid to the blue-chip engineer’s executives in 2020.
The chief executive received a base salary of £873,000 in 2020, down from £944,000 a year earlier after taking a temporary 10pc pay cut as the pandemic hit demand for its jet engines. It was the fourth year Rolls did not give the boss a pay rise.
Rolls said its new incentive scheme for executives will focus on delivering short-term targets around cash generation, profit, efficiencies and restructuring.
The company said last May it would axe 15pc of its workforce, equivalent to 9,000 staff, as part of a dramatic cost-cutting drive.
In the following two years executive targets include longer-term metrics such as debt reduction.
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If Mr East and other executives hit targets they will be paid in shares instead of cash. Mr East already gets 30pc of his base pay in shares. His pension payout has also been reduced to 12pc of salary, in line with general employees at Rolls.
Joel Griffin, director of performance and reward, said: “This is a unique remuneration policy, designed to meet the challenges the company faces.
“We are conscious of the challenging environment impacting our people and wider stakeholders, so the policy will not include any cash bonuses and will remove any risk of the sort of “lottery win” a more traditional long-term incentive plan could generate from a share price recovery driven by factors largely outside of our control.”