FTfm research revealing multimillion-dollar salaries at some of the world’s largest pension funds has prompted condemnation over the vast gulf in earnings between chief executives and scheme members.
Analysis of 14 schemes showed Jim Leech, former chief executive of the Ontario Teachers’ Pension Plan, was paid $7.4m in 2013, while his eventual successor, Ron Mock, received $2.5m in his role as vice-president of fixed income and alternatives.
ON THIS STORY
- Pensions group calls for shareholder action
- Pay of FTSE 100 executives jumps 50%
- The Big Picture Do executive pay metrics skew priorities?
- Bosses paid too much, says APG
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The $175bn Canada Pension Plan Investment Board paid its chief executive, Mark Wiseman, $3.1m.
The Canadian pension salaries outstrip the total earnings of many chief executives in the private fund sector, including Man Group’s Emmanuel Roman, who was paid $3.4m for 2013, and Jupiter’s Edward Bonham Carter, who received $3m.
Chris Roberts, director of social and economic policy at the Canadian Labour Congress, described the figures as “alarming”. “These are plans in which trustees have a fiduciary obligation to the plan members. They should be in a similar [financial] relationship to plan members,” he said.
Mr Roberts added that he was particularly concerned with respect to public sector funds. “I am not convinced that these salary levels are warranted when public sector budgets are being squeezed and public sector workers are being told to tighten their belts,” he said.
Elsewhere, the highest-paid executive at the Australian Super fund received $1.04m, the chief executive of Denmark’s ATP, Carsten Stendevad, received $903,000; and Dick Sluimers, the chief executive of APG, which manages the assets of a number of Dutch pension schemes, was paid $795,000.
Deborah Hargreaves, founding director of the High Pay Centre, a think-tank, said: “These figures highlight why we cannot rely on pension funds to hold companies to account on pay. These pension chief executives are benefiting from the high-pay culture themselves and often see nothing wrong with multimillion-dollar awards for top bosses. Scheme members often have a different outlook, but do not have a chance to have their say.”
Geraldine Egan, national pension official at the University and College Union for academics and researchers, said members of the Universities Superannuation Scheme feel particularly aggrieved. The highest-paid executive at the USS received a 50 per cent pay increase last year, to £900,000.
Ms Egan said: “[USS members] are aware that [pension executives] get high bonuses because they meet their benchmarks, and yet the funds are doing poorly and members’ benefits are being cut.
“It is problematic and our members find it very difficult. There is a mismatch between the financial world and members who work in the academic world.”
At the lower end of the scale, Anne Stausboll, chief executive of Calpers, earned $414,416; Sweden’s AP3 paid chief executive Kerstin Hessius $472,097; and the UK’s Pension Protection Fund paid its chief executive, Alan Rubenstein, $359,525.
Pension funds are in a conundrum when it comes to deciding how much to pay their top executives. Many are torn between wanting to hire the best staff — paying salaries and bonuses private sector professionals are used to — and meeting budget restraints.
Ontario’s Mr Mock defended high pay at his pension fund, which has generated a 10.2 per cent average rate of return since 1990, in an interview with FTfm last year.
He said: “[To get] upper-quartile performance, you need upper-quartile people. Our assets are intellectual capital and we need to make sure that we are attracting the best we can get our hands on.”
Ontario generated 10.9 per cent returns in 2013, underperforming all but one of the pension funds in the FTfm sample.
Ms Hargreaves dismissed the notion that multimillion-dollar salaries are necessary for pension funds to recruit the best executives.
“That argument is always put forward as a justification for top awards, but I would argue that these talents are not as rare as some people at the top of the corporate ladder like to make out,” she said.
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