06 June 2024 , 07:38
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British Gas owner Centrica has avoided a potential shareholder rebellion over its chief executive's £8.2 million pay deal last year, sparking outrage among campaigners who slammed the sum as "fundamentally wrong".
Boss Chris O'Shea raked in a pay package that was almost double the £4.5million he was paid in 2022. For 2023, O'Shea was paid an £810,000 salary, a £1.4million bonus and £5.9million in long-term incentives, pension and other benefits. Ahead of Centrica's annual general meeting on Wednesday, Pensions and Investment Research Consultants (Pirc), the influential shareholder advisory group, had urged investors to give the thumbs down to Centrica's remuneration report, which included O'Shea's bumper pay.
Despite the pushback, 90.1% of shareholders gave the green light to the pay report, with just 9.9% opposing it. Greenpeace UK's climate head honcho Mel Evans blasted: "This is a direct transfer of wealth from people struggling to pay their bills to energy bosses and their shareholders."
He added: "It's fundamentally wrong that Chris O'Shea is able to profit obscene amounts from an energy crisis that hits ordinary people hardest. And it is yet more evidence that our energy system is not fit for purpose."
"We desperately need an energy system fit for the 21st century, one powered entirely by cheap renewables that would lower peoples bills, give us energy security, and help the climate at the same time."
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Mr O'Shea candidly remarked in January that there was "no point" trying to justify his 2022 salary, which caused a stir as UK households grappled with soaring energy bills. He acknowledged the sum of his salary, bonus, and shares as "a huge amount of money" at that time, admitting he was "incredibly fortunate".
The bulk of his pay increase is attributed to the chief executive's long-term incentive plan, which increased largely due to Centrica's share price climbing over the past three years. Despite Centrica's adjusted pre-tax profits dipping to £2.8billion last year from £3.2billion the previous year, as announced in February, its retail division, predominantly British Gas, saw profits skyrocket from £94million in 2022 to £799million last year.
With Centrica shares having risen over 14% in the past year, the company's annual report justified the CEO's pay rise by pointing to "continued improvements in underlying performance and substantial share price growth."
Carol Arrowsmith, chair of Centrica's remuneration committee, earlier this year defended the need to keep "high performing executives who can lead this large and complex business" stating that Mr O'Shea's pay was "based on the terms he was appointed on".
She further asserted that the deal's structure "was approved by our shareholders, and it is consistent with similar companies," adding weight to the company's stance.
Meanwhile, Centrica have projected their household supply branch will achieve a "sustainable" profit level as early as 2024, which is two years ahead of schedule; this optimistic projection comes as energy markets begin to normalise post-crisis. The energy giant expressed relief at seeing a "more normalised external environment" especially given the recovery from Russia's conflict with Ukraine causing destabilisation in energy markets.
In May saw energy regulator, Ofgem, declaring a drop in average household energy bills by approximately 7%, set to take effect from July, owing to the fall in wholesale costs. The regulator has reduced its price cap to £1,568 annually for standard dual fuel households in England, Scotland and Wales, marking a significant decrease of £122 over the course of a year.