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Suncorp investors protest performance outcry
Article from: Herald Sun
Liam Walsh
November 01, 2007 12:00am

INSURANCE and banking giant Suncorp has suffered one of the largest protest votes for a blue-chip company over executive pay.

The concern at yesterday's annual meeting involved the dumping of performance hurdles for millions of dollars in shares to executives and overall pay.

The level of protest was such that Suncorp chairman John Story indicated he would step down as head of the remuneration committee following a review.

Suncorp also became the latest company to reveal how the credit crunch would hit -- potentially knocking $10 million to $15 million from revenues.

But management was adamant that the integration of last year's takeover target Promina was proceeding well "despite the challenges involved".

"We are on track to achieve our vision and, in turn, deliver to our stakeholders the benefits we laid out," Suncorp managing director John Mulcahy told shareholders in Brisbane.

The integration has resulted in some internal turmoil and departures -- most recently the chief executive of car insurer AAMI and its chief financial officer -- but Mr Mulcahy was adamant that morale was high.

Some shareholders, who later dined on croissants, muffins and tea and coffee, backed the company's performance but were fired up over pay.

The level of anger was unveiled with the proxy vote against the remuneration report -- which is non-binding.

Mr Story said the against vote was 39.6 per cent. Last year, miner Zinifex copped a 40.3 per cent protest. Excluding the government's then stake in Telstra, 51 per cent of shareholders rejected the telecommunication company's remuneration report last year.

The protest vote partly involved a pay package for Mr Mulcahy, which was altered mid-year following the merger with Promina.

The alteration dropped the total shareholder return performance hurdle for 227,261 shares -- valued yesterday at about $4.6 million -- for 2004 and 2005.

The change was "as a retention incentive" for Mr Mulcahy to stay on until October 2009 and 2010. A share plan for executives also had the performance criteria wiped for 2004 and 2005.

Part of the reason for doing so was because Suncorp felt it would provide parity because Promina executives had their incentives immediately rewarded due to the takeover. Another factor was concern they might take work elsewhere.

But Mr Story yesterday accepted that "these matters were not well handled by us". "The same objectives could have been achieved by the utilisation of a different structure without impact on the principle."

Suncorp, which posted an underlying profit of $1.06 billion, also said the liquidity crunch had driven up the cost of credit and expected it would wipe $10 million to $15 million from revenues.

Mr Mulcahy said the peak of problem had passed six weeks ago but was unlikely to return to pre-crunch levels.