Massively underpaid?
The business news that matters
Hello and welcome to the latest edition of Off to Lunch…
One of the largest shareholders in AstraZeneca has said that Pascal Soriot, the chief executive of the drug company, is “massively underpaid”.
Soriot was paid £16.9 million in salary and bonuses for 2023. This makes him the best-paid chief executive in the FTSE 100. It is also more than the pay packages received by those running AstraZeneca’s rivals in Europe, including, for instance, the boss of Novo Nordisk, the maker of the Ozempic weight-loss drug. However, Soriot is paid less than the chief executives of the big US drug companies.
The comments on Soriot’s pay were made by Rajiv Jain, the chief investment officer of GQG Partners, in an interview with the Financial Times. GQG is a top-20 shareholder in AstraZeneca, which is part of the FTSE 100 and valued at £165 billion, making it the second most valuable UK company after Shell.
Jain said:
“There is a compensation issue at AstraZeneca. The CEO is massively underpaid given AstraZeneca’s impressive turnaround since he joined more than a decade ago.
“I’d argue he should be paid more, not less. We have no issue with a CEO receiving proper compensation when [they are] delivering results.”
The comments have emerged ahead of AstraZeneca’s annual meeting on Thursday, where investors will vote on Soriot’s pay. While Jain and other investors have backed an increase in Soriot’s pay, Glass Lewis, which advises investors on how to vote at annual meetings, has said a proposed increase is “excessive”. Glass Lewis added: “While cognisant of the importance of motivating and retaining high-performing executives and of being able to compete for global talent, we believe that shareholders may prefer more modest increases.”
AstraZeneca has said the company’s approach to pay “reflects the need to be competitive in the global market for talent”.
This story goes to the heart of the debate in the UK about how to attract talent and encourage the growth of businesses. Julia Hoggett, the chief executive of the London Stock Exchange, said in a blog last year that there needed to be a “constructive discussion” about pay in the UK. This is what she wrote:
Attracting and retaining domestic and international talent to create that value is something that UK-listed company boards and their executive leadership teams strive to do every day.
And yet, very often, this talent objective is hampered by the advice and analysis of the proxy agencies and some asset managers voting against executive pay policies even when those pay levels are significantly below global benchmarks. Often the same proxy agencies and asset managers that oppose compensation levels in the UK support much higher compensation packages in different jurisdictions, notably in the US. This lack of a level playing field for UK companies is often not discussed, or if it is, the downside risks to our companies, our economy and our competitiveness are not part of the conversation.
It is essential to have a constructive discussion with all stakeholders about a topic that tends to generate emotion and strong views. If the UK capital markets community chooses to remain on the current path, the consequences of that decision should be explicitly recognised and accepted.
You can find that blog here
All this doesn’t mean that a pay-rise for Soriot should be waved through by investors without any questions being asked. But it does highlight that this is a complex debate with upsides, downsides and competing agendas. And it remains unresolved. A senior business leader said to me recently that what frustrated them about the debate is that the UK seems to look at pay differently for businesses than other fields, notably sport. The Premier League, for instance, is celebrated as the best league in the world for the quality of the players it has attracted. The cost of these players, while frowned upon, is largely a sideshow. An interesting thought…
Podcast…
The new episode of our Business Leader podcast looks at how a business can survive for 250 years and still be controlled by the same family. Rankin Brothers & Sons was founded in 1774 and is celebrating its 250th birthday in 2024. It has seen the creation of the United States of America, two World Wars, and the Covid-19 crisis. Jim Rankin is the sixth generation of the family to lead the business, which supplies corks and caps for beer, wine and spirits, but initially he didn’t want to be part of it…
You can listen to the episode on Substack here, Spotify here and Apple here
Other stories that matter…
1. Tesco has reported that annual pre-tax profits have more than doubled to £2.3 billion. Ken Murphy, chief executive, said: “Inflationary pressures have lessened substantially, however we are conscious that things are still difficult for many customers, so we have worked hard to reduce prices and have now been the cheapest full-line grocer for well over a year.” Interestingly, sales of Tesco Finest products rose by 15.7 per cent to more than £2 billion, which was faster growth than the rest of the business enjoyed. You can find the full results from Tesco here
2. Offering a cheery greeting to customers who arrive at your shop or business is genuinely crucial for commercial success, according to an analysis by retail expert Ian Shepherd. More here
3. Daniel Kahneman, the influential psychologist, economist and author, died last month. One of the important lessons he espoused is the importance of changing your mind about something if new information becomes available, even if you wrote a book about it. That is according to David Epstein’s latest Range Widely newsletter here
4. Former poker player Annie Duke has interviewed Michael Norton, a professor at Harvard Business School, about his new book on the importance of rituals. “Rituals can be amazing tools for generating emotions,” he says. You can read more here
5. The revival of print magazines is continuing. The fashion publication Nylon is to relaunch its print edition, seven years after stopping it. You can read this story and more on magazines in a piece by Axios here
The new Business Leader…
The new Business Leader website and magazine have now launched. We are building a new inspirational, aspirational and agenda-setting business publication for the UK. You can read our analysis, interviews and expert columnists on our website by clicking the image below. Our new magazine is now available in shops and you can subscribe to your own print or digital version by clicking here
And finally…
Richard Harpin, the founder of Homeserve and the owner of Business Leader's parent company, is hosting a private growth workshop for up to 12 CEOs where he will discuss his secrets to growing a billion-pound business. It will be held on May 1 at a private location in central London from 8am to 10am. If you’re the founder or CEO of a business with a turnover of at least £3 million and have a workforce of more than fifteen, please get in touch if you’d like to attend. You can email craig.wilmann@businessleader.co.uk for details and to book your place
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