Hermes chiefs pick up £4.7m

DIRECTORS at fund manager Hermes were paid £4.7m last year as the British Telecom pension scheme ran £6.3bn into the red.

Chief executive Tony Watson collected £748,247, a rise of 10%. His package included a £327,965 bonus.

Senior investment director Mike Carter got £501,414, including a £323,920 bonus. Another seven directors earned more than £250,000.

The pay contrasts with the staggering red ink at the two main funds that Hermes manages. On 31 March, BT's scheme reported a £6.3bn deficit under accounting standard FRS17, a record for a British company, and equal to £17,213 for each of the scheme's 366,000 members.

About £5.6bn was wiped off the value of the fund's investments last year, as it had too many shares and not enough bonds. Hermes also manages the Royal Mail's pension scheme, which plunged to a £4.6bn deficit.

But it said its directors' pay reflects 'relative' performance and 'total value added against the strategic benchmark set by trustees'.

Last year, when the BT fund lost £5.6bn, it said the 'total value added' under this measure was £120m. Hermes now 'recognises that long-term liabilities cannot be met out of good relative outperformance', and is giving 'careful scrutiny' to changing its performance measures.

Tony Watson and Hermes led the fund managers' charge against fat-cat abuses in quoted companies. Hermes recently blocked a £4.5m proposed payout to Jonathan Bloomer at the Prudential.

Meanwhile, the National Association of Pension Funds, of which Hermes is a leading member, is urging a shareholder revolt against a new pay deal proposed at money broker ICAP.

Four directors, including chief executive Michael Spencer, will share £4.2m bonuses, half in shares, if profits rise 13% this year. They collected £6.9m last year, when profits rose 39% to £123m pre-tax.