Astonishing that companies boast about how socially responsible they are whilst handing their leaders divisive pay awards, says RUTH SUNDERLAND
- Centrica to report huge profits, which in present mood will put firm in doghouse
- Bonuses are not a human right for boardroom classes
- CEOs should give bonuses up if profits are due to external events
Centrica, the FTSE 100 giant that owns British Gas, is in line for a pelting this week.
As The Mail on Sunday reported, the company is about to report enormous profits for 2022, which in the present mood will put the firm in the doghouse.
In a trading update last month, Centrica said its earnings would be around 30p a share, significantly higher than its previous expectations in November, and that it anticipates having a net cash position of more than £1billion.
A mauling by Labour politicians, green campaigners and consumer groups is inevitable and, up to a point, well-deserved.
A huge profits haul is not a good look a couple of weeks after it was shamed for hiring debt collectors who broke into the homes of the most vulnerable customers.
In safe hands?: Centrica is an understandable target for outrage when so many families are struggling to pay their energy bills
And Centrica is an understandable target for outrage when so many families are struggling to pay their energy bills.
The reality is a little more nuanced.
Chris O’Shea, the chief executive, has at least apologised for the meter scandal, which is the least he could do.
Centrica will hand over a large chunk of its revenues in taxes as well as rewarding its shareholders with a juicy dividend along with share buybacks.
No doubt this will be criticised by Labour and the green brigade, who gloss over the fact that the dividend will benefit Centrica’s half a million small shareholders, many of them ‘Sids’ who bought shares in the Thatcher-era British Gas privatisation.
Dividends from Centrica, along with fellow energy giants BP and Shell, will also replenish the nation’s pension savings.
O’Shea has taken on 700,000 customers of failed ‘challenger’ energy companies – a costly exercise. Without profitable suppliers able to provide a lifeboat when these thinly capitalised challengers went under, the consequences for marooned customers and the taxpayer would have been worse.
Along with BP and Shell, Centrica can play an important role in the UK’s energy security and the green transition.
It wants to turn the Rough gas storage site, reopened last year, into a hydrogen facility and is developing a low-carbon production hub at Easington in Yorkshire.
Strip away some of the theatrics and Centrica has a decent case for its own defence.
However, it needs to act with sensitivity, particularly around executive rewards.
So far, O’Shea’s conduct has been exemplary on this score. He is currently one of the lowest-paid chief executives in the FTSE 100, having waived several bonuses in solidarity with struggling customers.
But the grandees in charge of pay have signalled that, if his performance merits a bonus, they will pay one this time. In the view of the remuneration committee, another sacrifice by O’Shea is ‘unsustainable’. Really? By any normal standards, £875,000, the sum he received in 2021, is a perfectly sustainable proposition.
Presumably, they mean his pay is unreasonably low in comparison with other FTSE 100 chiefs. This attitude tells shareholders everything they need to know about skewed values at the top of UK plc.
Bonuses are not a human right for the boardroom classes. CEOs ought to give them up if the company has been caught out in abhorrent behaviour, or if large profits are due to external events rather than executive genius.
O’Shea’s gesture should not be painted as some kind of saintly self-denial.
It’s astonishing how many companies boast about how socially responsible they are whilst handing their leaders inflammatory and divisive pay awards.