Neil Collins Notebook: AstraZeneca waives the rules

How much is Pascal Soriot worth? No, not how much has he in the bank, but how much would be a suitable reward for doing his job brilliantly well? AstraZeneca, the company he heads, has saved thousands, perhaps millions, of lives with its Covid vaccine. With generous help from the UK taxpayer, it has produced a pharmaceutical miracle in record time. Yet this week some of the shareholders were revolting, voting against his pay packet. Talk about gratitude…

Soriot would not be headed for the poor house, even if every shareholder had voted against the remuneration committee proposals to add the odd couple of million to the maximum he could be paid, from £15.4m to £17.8m. It’s the principle of the thing, says the Investment Association, the fund managers’ trade body. There is a limit to the multiple of the CEO’s basic salary that is considered reasonable as a maximum bonus, and this is well past it. The members were urged to vote against the motion. Two of the IA’s larger, if less successful members, Aviva and StndrdlfAbrdn had declared their hands in opposition.

Others are not so sure. That exceptional performance justifies exceptional rewards has been a generally accepted principle in the top persons’ remuneration game. It has had the unintended consequence of producing galloping inflation in CEO salaries, as no self-respecting board wants a CEO who is not in the top quartile (by pay, and hence by ability). So it is not so much the size of the pay packet as the way the Astra directors bent the rules in his favour that has moved the faceless IA to action. 

The board’s explanation is weak in the extreme, and it is hard not to conclude that the rem. com. members were simply dazzled by what Astra under Mr Soriot has achieved, and were scared of losing him to some US pharma group. This is corporately unhealthy, since it gives the CEO too much power. Making a $39bn acquisition as Astra did last December is no reason for a bonus. The work to justify that chunky investment starts now. 

Even though 40 per cent of the Astra shareholders voted against his deal, the result does not oblige Soriot to rush back from his Australian home and resume his duties in person. The votes are purely advisory. Yet they probably signal the beginning of the end for him at the helm. Having endured abuse from the European Union for not producing enough of a vaccine that some member states didn’t want to use, and now from the shareholders, it would be no surprise if he decided that enough was enough, and departed – taking his gleaming new bonuses with him, of course.

Full house

This being the annual meeting season, pay disputes with shareholders are everywhere. This week trades unions and the High Pay Centre have written to the big investors urging them to vote against salary packages where the gap between the CEO and the worst paid employee in a company is particularly egregious. Sadly, the writers have missed the point. Top investment managers have no motive to call for restraint, since many are beneficiaries themselves.

Still, while few disputes are on the scale of Soriot’s, for sheer chutzpah the award to Mark Ridley, CEO at estate agents Savills, takes some beating. To get his maximum bonus, profits had to top £120m. The lockdown outturn was just £85m. Jolly bad luck on Mark, you might say. After all, Covid was hardly his fault, and we’re all in this together.

Except we’re not. The board awarded him £350,000, as a sort of “pluckiest loser”, claiming that the agency had increased its market share. And before you burst into tears, the committee deemed that he had made 90 per cent of his other targets, so he gets a further £500,000. No wonder the IA issued a rare “red top” notice urging a vote against. It made no difference. Four-fifths of the shares were voted in favour of the remuneration report. 

Homeowners don’t do care

“Proposals on social care reform will be brought forward” said Her Maj this week, at that point probably wondering whether she had been handed a speech almost as old as she is by mistake. In a less respectful environment, Denis Skinner or his equivalent might have shouted: “No they won’t!”.

Our Dear Leader said he had a plan for social care reform when he came into office. It’s since become clear that he has no more idea of what to do than anyone else, but the mention in the Queen’s Speech has set the usual hares running. Nobody doubts that care of the elderly is both hopelessly inadequate and rapidly getting more costly, as more people live longer. Nobody doubts that any solution is ruinously expensive.

However, the mammoth in the ice block here is the politically toxic one of home ownership. Did you slave to pay off the mortgage over 25 years so you could pass on “the family home”? Or were you just lucky to have bought with borrowed money just as prices were taking off like never before? The truth is that the mortgage might have been a struggle to start with, but inflation quickly took the sting out of it, while the house just got more valuable. You did nothing.

The other truth is that the very notion of passing on the family home is a self-deceit. With a very few exceptions, the children don’t want to live in the house left to them by their parents. They don’t want to live together, and as soon as the last oldster dies, the property is sold and the proceeds divid up between the survivors. 

There is no logical reason why an inherited house should be treated any differently from an inherited share portfolio or art collection, but then logic and housing policy are distant relations, here as in so many other ways. A rational approach, using the equity in the house to pay for the care of its lucky owners, would generate enough to allow the state to pick up those who had no wealth to contribute. It is also why the prime minister’s phantom plan warranted just nine words in the speech. Perhaps the nine words in the next speech might be: “Proposals on social care reform will be shelved (again)”.