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Aviva chief executive steps down after shareholder revolt – with £1.75m payoff Aviva chief executive steps down after shareholder revolt – with £1.75m payoff
(about 3 hours later)
Aviva chief executive Andrew Moss has stepped down and will leave the insurer with a £1.75m severance package after a dramatic boardroom reshuffle just days after shareholders voted down company's pay policies. Former RSA boss Andy Haste and Aviva's finance chief Pat Regan have emerged as frontrunners to replace Aviva boss Andrew Moss, the latest chief executive to be forced out following a shareholder revolt.
In the latest example of the "shareholder spring" that is taking place in the City, the insurer is installing its incoming chairman, John McFarlane, as an executive deputy chairman immediately, and as executive chairman from 1 July while a successor for Moss is found. Moss – who presided over a 60% decline in the insurers's share price during his time in the top job at Aviva – will leave the insurer with a £1.75m payoff. His departure follows that of Trinity Mirror's Sly Bailey and AstraZeneca's David Brennan, who also stepped down after shareholders decided their performance was not good enough.
Investors had become frustrated with the tenure of Moss and he endured a rowdy annual meeting last Thursday when 60% of investors failed to support the remuneration. Haste, who is credited with turning around rival insurer RSA after its asbestos claims crisis in 2002, is a strong candidate to replace Moss at Aviva, as is Regan, who is regarded as the top internal candidate. Another possible contender is Trevor Matthews, 60, the former Friends Life boss who joined Aviva last year as its UK head.
Despite presiding over a 60% drop in the share price since he took the helm in July 2007, Moss will get his £960,000 basic salary for this year; £300,000 in lieu of bonus; £209,000 under a pension plan; £45,000 in legal fees and 75% of the 2009 bonus that was deferred into shares, worth £240,000 at today's share price. The remuneration committee has prevented share schemes worth up to £2.4m from paying out. Panmure Gordon analyst Barrie Cornes said: "The obvious popular choice would be an external appointment and it would probably be Andy Haste. But the obvious candidate doesn't always get the job." He pointed to Harry Redknapp's failure to get the England manager's post.
Its current chairman, Lord Sharman, said Moss had approached him with the decision to leave as "he felt it was in the best interests of the company that he step aside to make way for new leadership". Aviva shares rose nearly 3% to 311.3p. Moss made the call to his chairman on Monday from the holiday he had departed for shortly after Thursday's tumultuous annual meeting. Haste has not taken another job since he quit RSA in August, a year after the failure of his bold stab at buying Aviva's UK general insurance business for £5bn.
Barrie Cornes, analyst at Panmure Gordon, said: "The move will undoubtedly be welcomed by shareholders and follows a number of events at Aviva that can at best be described as 'unfortunate'. We believe that John McFarlane will conduct a listening exercise with shareholders along with a review of the business. The shares should bounce today on the news of Moss's departure and could rally further if [former RSA chief executive] Andy Haste's name becomes linked to the CEO role." In the latest example of the "shareholder spring" that has grown in strength through the current AGM season, Aviva handed its incoming chairman, John McFarlane, day-to-day control of the business until a successor for Moss is found. Aviva hinted that it would take some months, although it is under pressure to find a new chief quickly as Moss's departure leaves the company vulnerable to a takeover or breakup. McFarlane will meet major shareholders in coming days and conduct a review of the business, which is heavily exposed to the eurozone debt crisis. Some are unhappy at Aviva's failure to recover from the financial crisis as well as UK rivals Prudential and Legal & General.
Haste, who at RSA made an unsuccessful £5bn bid for Aviva's UK general insurance business in 2010, would be a strong candidate for the post. The top internal candidate is Pat Regan, Aviva's finance chief. Investec analyst Kevin Ryan said Moss had "tinkered" with the company's strategy, confusing investors. There have been several U-turns, although Aviva's 2010 decision to focus on 12 core markets rather than 30 has been welcomed in the City.
The departure of Moss comes amid fresh investor activism in the City – David Brennan, chief executive of AstraZeneca, and Sly Bailey, chief executive of Trinity Mirror – have both stepped aside in recent weeks after shareholders became disgruntled with their performance. Protests have also been registered at companies as diverse as Barclays, Man Group and Xstrata. Bookmaker William Hill holds its annual meeting on Tuesday and is expected to face protests over pay. Regan, 46, is the only executive who remains of the existing management from recent years. Aviva's highly regarded UK head Mark Hodges left last June after 20 years to run Towergate Insurance and prepare it for a flotation. Aviva's equally respected European chief Igal Mayer was ousted last month after 23 years with the insurer, making way for Matthews, who was elevated to executive director of developed markets.
The protests coincide with a move by Vince Cable, the business secretary, to hand investors more powers to clamp down on boardroom excess. New measures to make the vote on pay binding, rather than advisory, are expected to be outlined in the Queen's speech on Wednesday. Investors had become frustrated with the tenure of Moss and he faced an acrimonious annual meeting last Thursday when 60% of shareholders failed to endorse the insurer's pay policies, including Moss's package, worth up to £5m, and a £2.2m golden hello for Matthews.
Moss had been due to address shareholders and City analysts at an Aviva strategy day on 24 May and would have faced further questions about his stewardship of the insurer, whose share price has fallen 60% since he took the helm in July 2007. That investor day has been postponed. "Andrew has been unpopular with many shareholders who feel he has at times seemed out of touch with the issues that they thought were facing the group," said Oriel Securities analyst Marcus Barnard.
At the annual meeting some 10% of investors had failed to back the re-election of Moss to the board. M&G, the investment arm of Prudential which holds just under 3% of the stock, is thought to be among the investors to have abstained on Moss and Sharman. Despite the big drop in the share price since he took the helm in July 2007, Moss will get his £960,000 basic salary for this year; £300,000 in lieu of bonus; £209,000 under a pension plan; £45,000 in legal fees and 75% of the 2009 bonus that was deferred into shares, worth £240,000 at Tuesday's share price. The remuneration committee has prevented share schemes worth up to £2.4m from paying out.
David Fleming, Unite union's national officer, described Moss's departure "a welcome and important step". Aviva's outgoing chairman, Lord Sharman, said Moss had approached him with the decision to leave as "he felt it was in the best interests of the company that he step aside to make way for new leadership". Moss called his chairman on Monday from the holiday he had departed for shortly after Thursday's tumultuous annual meeting. Aviva shares closed up 0.6p at 302.9p after rising 3% earlier in the day.
"Under the disastrous leadership of Andrew Moss, Aviva has scaled back its operations resulting in job losses, including the decimation of its Irish workforce and pay suppression for the staff,'" he said. Moss would have faced further questions about his stewardship at an Aviva strategy day on 24 May. That investor day has been postponed.
McFarlane, who briefly sat on the board of Royal Bank of Scotland and is best known for running ANZ in Australia, said: "I feel I can make a real difference. My first priorities are to regain the respect of our shareholders by eliminating the discount in our share price and to find internally or externally the very best leader to be our future chief executive. I will meet all of the major investors over the coming days and weeks." At the annual meeting, some 10% of investors had failed to back the re-election of Moss to the board. M&G, the investment arm of Prudential which holds just under 3% of the stock, is thought to be among the investors to have abstained on Moss and Sharman.
He set out new priorities for the group – under the headings: focus, financial strength, performance and stakeholders – and is likely to face tough meetings with shareholders in the days ahead. McFarlane, who briefly sat on the board of Royal Bank of Scotland and is best known for running ANZ in Australia, said: "My first priorities are to regain the respect of our shareholders by eliminating the discount in our share price and to find internally or externally the very best leader to be our future chief executive."
Aviva had attempted to head off a revolt by promising to look again at its policies of "golden hellos" after a signing-on fee for new UK director Trevor Matthews infuriated investors, while Moss himself waived a £46,000 pay rise which would have taken his salary above £1m.