Top executives may be brilliant – but their pay’s about timing and luck
If you are the chief executive of a FTSE 100 company, and thus the recipient once a year of oodles of share-based incentives worth several times your £1m-ish salary, the quickest way to get seriously rich is as follows. First, trash your price. Second, wait for your incentive shares to be awarded at the bottom of the market. Third, lead the glorious recovery. Even if you succeed only in getting the share price back to the original starting point, a V-shaped journey is much more lucrative than going sideways in boring fashion. You will collect a windfall gain. Long-term shareholders will just hold an asset restored to its former value.
There is no suggestion that Mark Cutifani, chief executive of Anglo American, has used sleight of hand to manufacture a windfall gain for himself. Indeed, it would be impossible to do so. Anglo’s share price, as with all the big miners, is blown about by forces beyond its control – such as the prices of iron ore, coal and copper. The point, though, is that the V-shaped passage of Anglo’s share price in the past two years has boosted the value of Cutifani’s share awards in a manner that seems perverse.
Anglo was worst performing FTSE 100 stock in 2015 but became the best performing in 2016 as commodity breezes changed direction violently. It was Cutifani’s good luck to be awarded his shares at the right moment. He got his stock at 444p a year ago when the award was worth £4.4m. Now, after the return of the share price to £11.84, that package is worth almost £12m. That is after only one lap of the track and via a scheme that is supposed to measure “long-term” performance. Cutifani may be doing an excellent job, but common sense says the size of his likely windfall owes more to timing than to personal brilliance.
