Rich rewards for The Man from the Pru.
Tidjane Thiam was always going to be a controversial choice as chief executive of Prudential (LSE: PRU), a company so boring that its financial statements are an NHS-approved treatment for chronic insomnia.
A former government minister and civil servant in Africa's Côte d'Ivoire, he worked for McKinsey in Paris after being made redundant by a military coup which saw him imprisoned for several weeks. When appointed by Prudential board's in 2009, Mr Thiam became the first black chief executive of a FTSE 100 company.
The trouble is, controversy has dogged him ever since his initial appointment.
A bid too far
Barely had Mr Thiam arrived at Prudential before he launched an audacious bid for AIA, the Asian arm of troubled American insurance giant AIG, whose bets on the sub-prime mortgage market had spectacularly imploded.
Mr Thiam didn't need his MBA from France's prestigious INSEAD to spot a bargain. But the trouble was, just because something is cheap doesn't mean than you should buy it. A bargain is only a bargain, in other words, if it's something you would have bought anyway.
And serious number of major institutional shareholders didn't see paying £22 billion for AIA as something that they wanted their company to be doing. Particularly if it meant coughing up for a £14 billion rights issue to help fund it. Nor, it turned out were the FSA particularly happy at the prospect, fearing that it would leaving the firm under-capitalised.
What's more, not everyone agreed with Mr Thiam that the deal was a bargain. Schroders (LSE: SDR), for instance, described it as "a charter for investment bankers to make money at the expense of shareholders".
Despite Mr Thiam circling the globe to sweet-talk shareholders, the whole deal fell messily apart, leaving the Pru with a hefty bill. Estimated at the time at over £400 million, the latest set of accounts put the precise hit to the business at £377 million -- hardly chump change.
Rich rewards
Not surprisingly, then, rumours last year repeatedly had the Pru and Mr Thiam about to part company. Major shareholders, it was said, were calling for his head. Tensions ran high at last June's AGM, to which -- predictably enough -- adjectives such as "stormy" were attached.
But however angry shareholders were last June, their reactions this June are likely to eclipse that. Mr Thiam, we learn today, is seeing his annual bonus reduced by just 3% to reflect the cost of the AIA debacle.
In short, he'll be trousering £1.57 million and not £1.62 million, leaving him with a total take home package of £2.76 million. All of which, as today's Daily Telegraph points out, is in respect of a year in which he immolated £377 million of other people's money.
Doubly ironic, perhaps, is that the story broke on a day in which a popular financial website ran an April Fool's spoof about new scientific research purportedly revealing that bankers were born with a gene that prevents them from feeling either empathy or shame.
Shareholder impotence
Here on The Fool, we've seen several examples of shareholder activism take directors to task over pay awards that have been seen as excessive. The redoubtable carmensfella, for instance, has regularly reported on developments at Tandem (LSE: TND), a Midlands-based bicycle business.
But what's possible to achieve with smaller businesses is very difficult to emulate at FTSE 100 giants. Institutional investors, we are told, are sanguine. And despite Mr Thiam's vows last June to improve communications with private investors, I suspect that no one felt the need to consult any. I know what I'd have said.
In a sop to shareholders, Mr Thiam has agreed to take all of his bonus as shares, rather than as 50% cash. What's more, he won't get his hands on the shares until 2014, in a development described as demonstrating his long-term commitment to the business.
AIA, meanwhile, has floated on the Hong Kong stock exchange in an offer that was twice oversubscribed, and is doing well under Mr Thiam's predecessor at the Prudential, Mark Tucker.
Catch 22
All in all, something of a mess. Due protocol, I'm sure, was followed. The Pru will have had the appropriate board sub-committees in place, and those directors who needed to approve Mr Thiam's pay packet will have done so.
But it does raise an interesting question. Just what has to go wrong at the Pru for Mr Thiam to take a hit to his bonus that he might actually notice?
Shareholders will be hoping that they don't find out.
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