ABI gives Compass red card over former excutives' pay

Compass Group‘s slap on the wrist from institutional investors over the controversial pay packages handed out to former executives will not affect the new management team's efforts to reinvigorate the company, experts said this week.

The Association of British Insurers (ABI), which represents the majority of UK insurers, last week issued a red-top notice to its investor information service subscribers. The service informs readers how companies are tackling issues of corporate governance, covering areas that shareholders might be voting on.

Red is the ABI's highest rating, denoting serious concern at what it sees as failings by Compass's remuneration committee, which was chaired by Peter Cawdron, now Punch Taverns chairman.

The alert followed last month's annual report, which revealed that Alain Dupuis, previously chief executive of Compass in Asia and the Middle East, resigned on 1 October 2005 with a severance payment of £430,000 but was immediately re-employed as a consultant. A subsequent termination of Dupuis's new three-year consultancy contract saw him net a hefty £1.6m in additional severance, the last £250,000 of which is due to be paid on 31 July.

A spokeswoman for the ABI said: "The main point for us is that the remuneration committee hasn't looked at the terms and conditions of Dupuis's employment and a second large severance payment simply shouldn't have occurred."

She stressed the ABI had no issue with the new executive team led by chairman Sir Roy Gardner, who will host the company's annual general meeting on 16 February.

While the red notice is considered serious by investors, it should not have a long-term impact on Compass, according to Kevin Lapwood, support services analyst at broker Seymour Pierce.

"I don't see a black mark from the ABI having an impact on Compass's share price," he said. "Roy Gardner is very hot on regulatory compliance and governance issues and will most likely play this with a straight bat at the forthcoming general meeting, explaining what has happened in the past can't occur now.

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By Chris Druce

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