Hermes, the fund management group which lobbies on executive pay, faces controversy over its own remuneration after it emerged that two of its top executives had seen their pay rise tenfold last year.
Peter Butler and Steve Brown, the fund managers who run the Hermes Focus funds which invest in companies with poor corporate governance, enjoyed pay rises to £1.8m from £141,000 and £136,000 respectively last year.
The pay of Tony Watson, the chief executive, rose to £1.6m from £415,000, according to the Hermes Pension Management annual report in a filing at Companies House. The total cost of paying the 17-strong board rose to £9.8m in 2003 from £4.7m and gives one of the few insights into the remuneration of fund management groups, which do not have to disclose directors' pay as public companies do.
The fund management group runs the BT pension scheme and its chairman, Sir Tim Chessells, tried to pre-empt controversy over the pay levels by highlighting the performance of that fund, which produced a 19.8% return over the 2003 calendar year. This was 2.1% above its target and 2.8% above the average for the 50 largest UK pension funds.
Sir Tim said: "The BT pension scheme trustees are highly sensitive to the debate surrounding executive pay. However, they also believe in rewarding executives for their contribution to the success of Hermes and the corresponding investment returns to clients."
Mr Butler's pay included a £132,000 basic salary, £166,000 of annual bonus, £12,000 in other benefits and £1.5m from a long-term incentive plan which is based on three-year performance.
The pay of the Hermes executives emerged as Investec, the Anglo-South Africa investment management group, revealed five of its top fund managers had walked out in a dispute over pay.
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