Bonuses and executive pay are becoming an issue for pro-consumer charity
The Consumers’ Association, a charity that campaigns for consumer rights under the Which brand, is facing a revolt from its members over the introduction of a bonus scheme and high levels of executive pay.
A letter is circulating among 400 members of the charity objecting to the introduction of a bonus pot that could be worth up to three times the executives’ salaries, which have almost doubled since 2007.
The bonus scheme could reward four employees, including chief executive Peter Vicary-Smith, with a potential combined payout in excess of £2m when calculated against their current salaries.
Patrick Taylor, who composed the letter to members and has previously stood for the charity’s council of trustees, has called the bonus scheme “obscene”.
He said: “The whole basis of Which’s success is built on its probity and testing, and its reputation is in danger of being damaged by ill-conceived commercial aims.”
In order to receive the top payout the four executives in the Long Term Incentive Plan (LTIP) bonus scheme need to grow the value of the charity’s commercial arm by 33% or more across a three year period.
Accountancy firm Smith & Williamson will carry out the valuation of the business in order to determine the size of the bonuses.
The executives will clock up a bonus worth 100% of each year’s salary across the next three years if the 33% growth target is hit between 1 July 2012 and 1 July 2015.
The bonus will halve if the commercial arm’s growth is between 22% and 33%, while no bonus will be awarded for growth of less than 22%
A Which spokeswoman said: “Our social enterprise works without any public funding or donations and its success is therefore entirely dependent on commercial performance.
“This means competing for and retaining staff in an extremely difficult commercial environment in which most magazine publishers are losing sales.”
The bonus scheme was approved by a remuneration committee on September 2012 and the council of trustees, which includes co-opted and elected members, was briefed on it on 23 September 2012 and 25 June 2013 before it was announced to members at the last annual general meeting.
Daily Politics presenter Jo Coburn was elected to the council and took up a position in February this year, but resigned her position within the same month. A spokeswoman said Coburn’s resignation was unrelated to executive pay and bonuses, explaining she resigned for personal reasons.
Executive pay at the charity has increased significantly through the depths of the global economic downturn and the economic recovery.
The Consumers’ Association paid its top six executives £1.29m in its financial year ending 30 June 2013, up from £750,000 for the 2006/7 financial year.
Research from Third Sector magazine reveals Vicary-Smith was the highest earning chief executive at a general charity based on research gathered up until January 2013.
Taylor has labelled the top four’s remuneration “totally out of order” and proposes the highest salary to be capped at six times average earnings and bonuses to be limited to 10% of salary. He pointed out that “money spent on executives cannot be given to the charity.”
Rumblings over pay and bonuses come as Which struggles to gain traction with its Indian operation.
It has decided to stop production of its Indian magazine Right Choice, but a spokeswoman added the company “will continue to publish content online and will look again at opportunities in the future” in India.
Meanwhile, the Consumer’s Association revenues have surged in the past few years from £20.3m for the year ending June 2009 to £86.6m for 2012/13, its most recent financial year.