The leader of Centrica, which owns British Gas, received a salary increase of nearly £8.2m, even though he acknowledged that his lower earnings from the previous year were unjustifiable.
Chris O’Shea’s total earnings were £903,000 in basic salary along with additional bonuses of £7.3m in cash and shares.
The CEO’s overall compensation significantly increased due to a £5.9m bonus plan that acknowledged his achievement in meeting goals related to the company’s stock price, earnings, cash flow, and metrics including safety and customer satisfaction.
Centrica’s stock has experienced a consistent increase over the past couple of years, potentially due to the rise in worldwide gas prices following Russia’s takeover of Ukraine.
However, the company argued that O’Shea was responsible for the increase in performance.
Information about O’Shea’s compensation package was revealed in Centrica’s yearly report, which was released on Tuesday, following a month of the company announcing strong profits.
In 2023, earnings for British Gas, a supplier of energy to households and businesses in the UK, increased to £751 million, compared to £72 million from the previous year.
After Ofgem, the regulator, raised the industry price cap, the company was able to gain back some of the expenses incurred by selling energy at wholesale prices to its 10 million customers during the energy crisis. This led to a significant increase in their profits.
Earlier this year, O’Shea expressed that it was futile to defend his salary of £4.5m. He stated to the BBC that such a large amount cannot be justified and he acknowledges his immense privilege. However, he clarified that his pay is determined by the remuneration committee, not himself.
However, Centrica attempted to provide reasoning for a package that is almost twice as large, outlining the justification in a specific section of their annual report for the £8.2m agreement made this year.
The pay committee of the company, led by experienced board member Carol Arrowsmith, announced that they have found that a share bonus worth £5.9m, based on the company’s performance from 2021 to 2023, was not unfairly inflated by any unexpected profits.
The bonus was worth two-thirds of the company’s share price, which has increased by over 100% since the invasion of Ukraine and its consequences, including the rise in gas prices.
The committee assessed the total salary and bonus of O’Shea, which amounted to £8.2m. They attributed the 82% increase from the previous year to ongoing enhancements in overall performance and significant growth in share price.
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The pay committee stated that the amount accurately represents the contributions of Chris O’Shea and the company during the specified time frame. They also mentioned that the total pay for the group chief executive in the next two years is expected to decrease due to reduced share-based bonuses for executives.
The actual amount of O’Shea’s total compensation may vary, as it is influenced by the fluctuating value of his bonus stocks. These stocks will be available for sale within the next three years.
Luke Hildyard, the head of the High Pay Centre, stated that according to Mr O’Shea, it is not believable to claim that the work he does justifies a pay increase that is even half of this size. Additionally, it is not essential to the company’s success. This is a significant failure in leadership and a failure in following proper policies.
Arrowsmith stated that it is important for Centrica to be prepared for future success. This entails securing and retaining talented executives who are capable of leading the company effectively. The CEO’s compensation is determined by the terms of his employment and was approved by shareholders. It is also in line with the practices of other comparable companies.
In the section discussing O’Shea’s compensation in the yearly report, Centrica disclosed that they allocated £140m towards assisting customers who faced difficulties with paying their energy bills.
Source: theguardian.com
