Outrage over executive pay deals

EXECUTIVES at HSBC Holdings Plc, Europe's largest bank by market value, and food retailer Tesco may be next to face outrage from their shareholders for being paid too much, investors said.

GlaxoSmithKline Plc became the first major British company to have its compensation plan rejected by investors. The proposal was to pay chief executive officer Jean-Pierre Garnier as much as $28 million if he were fired.

Pension & Investments Research Consultants Ltd., whose members oversee more than close to €1 billion of assets, says HSBC director William Aldinger has "one of the most lucrative contracts ever seen in the UK."

They also question why Tesco chief executive Terry Leahy is having his potential severance pay package boosted 70% to £4.6 million.

"If shareholders were being consistent about these issues, HSBC and Tesco should be up there in the firing line," said Stuart Bell, PIRC's research director, in an interview.

This year is the first time that British investors have been allowed to vote on corporate pay policies. The votes are used by the companies for advisory purposes, as opposed to being binding.

HSBC shareholders will be asked to approve the bank's pay plan on May 30. Aldinger, who heads its Household International unit, received a £20.3 million payment for terminating his contract following HSBC's $15.5 billion takeover of the largest US lender to people with poor credit records. He holds the same position as he did before the acquisition.

Aldinger's contract guarantees him a minimum of $16.6 million in salary and cash bonuses for the next three years and a further $21 million in share rewards according to PIRC.

"Household was the biggest acquisition in HSBC's history," said spokesman Adrian Russell. "We wanted to retain his services for a minimum period to ensure that the business continues to run well and is integrated into HSBC."

The National Association of Pension Funds won't oppose the executive pay proposals at HSBC, the Financial Times reported.

Tesco last year doubled the maximum bonus under the executive incentive plan to 150% of salary and kept the directors on contracts that pay them two years in severance if they are fired, according to PIRC.

The changes mean Tesco directors could get five years salary in compensation if they lose their jobs, PIRC told its clients.