LONDON, April 30 (Reuters) – British insurer Aviva's chief executive Andrew Moss has waived his 2012 salary increase, bowing to shareholder concerns over executive pay three days before he is due to face investors at the group's annual general meeting.
Aviva, Britain's second-biggest insurer, is also launching a review into whether it over-compensates newly-recruited executives for missing out on bonuses due in their previous jobs, it said on Monday.
Shares in the group lost almost a quarter of their value last year, weighed by its exposure to troubled euro zone economies, and lagging a 12 percent decline in the Stoxx 600 European insurance sector index.
Moss was to have received a 4.8 percent pay increase this year, boosting his basic salary by 46,000 pounds to just over 1 million pounds.
“A number of shareholders have indicated they would like to see a different approach to the way we compensate senior directors on recruitment, and an even closer correlation between our pay packages and shareholder returns,” said Scott Wheway, the chairman of Aviva's remuneration committee.
“We take the views of our shareholders very seriously”
Aviva is not holding a formal review into how much its managers get paid but will continue to discuss the issue with investors, it said.
Institutional investor advisory group PIRC said it would not change its recommendation, issued earlier this month, that investors vote against Aviva's executive pay awards at its May 3 annual meeting.
Earlier this month PIRC called on investors to oppose Aviva's pay practices because of “excessive” rewards, and also cited one-off share awards received by Finance Director Pat Regan as part of his recruitment offer.
Last week directors at banks Barclays and Credit Suisse endured a barrage of complaints over pay at their annual meetings, with more than a quarter of shareholders at each bank voting against their remuneration plans.
Aviva shareholders feel the company puts too much emphasis on operating profit when setting performance targets for directors, neglecting bottom line profit, which has a more direct impact on the share price, said Panmure Gordon analyst Barrie Cornes.
“Aviva will rightly come under fire for failing to address the winds of change impacting director remuneration over the last 12 months,” Cornes wrote in a note.
Operating profit, which excludes many one-off factors, was largely unaffected by financial market turmoil last year at the height of the eurozone sovereign debt crisis.
Last month Aviva said its operating profit rose by a forecast-beating 6 percent to 2.5 billion pounds ($4.06 billion), although its pretax profit fell 96 percent to 87 million pounds.
Analysts said investor concerns over Aviva's payments to new recruits were probably also triggered by the appointment last year of ex-Friends Provident chief Trevor Matthews.
In his first month at Aviva, the new Aviva UK chief executive got 470,000 pounds in cash and shares worth up to 2.02 million pounds as compensation for giving up benefits due under his previous employment.
Moss has previously faced criticism from investors over Aviva's poor share price performance compared with peers, although a strategy aimed at refocusing the company on its strongest markets launched in 2010 has won over some doubters.
Aviva shares were down 2 percent by 1345 GMT, when the Stoxx 600 Europe insurance sector index was down 0.8 percent.
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