Rolls-Royce Holdings is set to give its chief executive a substantial annual pay increase, as he approaches one of the most lucrative payouts in the history of British public companies. Sky News reports that Rolls-Royce’s board has engaged in discussions with major shareholders to revamp its remuneration policy.
The proposed changes, which have received approval from key investors, will see Tufan Erginbilgic’s annual bonus rise from two times to three times his base salary of approximately £1.2m. Additionally, his long-term incentive award will double from a maximum of 375% of salary to 750%, making it one of the most generous rewards programs among FTSE-100 companies. As a result, Mr. Erginbilgic’s total compensation package, including salary, annual bonus, and LTIP award, could reach over £13m.
Since joining Rolls-Royce at the beginning of 2023, Mr. Erginbilgic has overseen a remarkable turnaround for the company. Following the challenges brought on by the COVID-19 pandemic, he has been instrumental in the recovery of the company, which supplies engines to leading airlines and is involved in the development of small modular reactors for new nuclear power sources.
Recent developments, such as the leadership change at BP where Mr. Erginbilgic previously worked, have raised concerns at Rolls-Royce about the potential loss of their CEO to another prestigious corporate position. Interestingly, despite the increase in his pay under the new policy, Mr. Erginbilgic is expected to earn less than what he would have received under the previous policy. This is due to the significant stock awards he received upon joining Rolls-Royce when its stock price was low.
The revamped remuneration policy reflects the company’s improved performance and the competitive landscape for top talent. The remuneration committee, with the full support of the Board, has taken a proactive approach to review and amend the policy. The revised policy is slated for shareholder approval at the 2026 Annual General Meeting.
Rolls-Royce’s valuation has soared over 12 times since Mr. Erginbilgic assumed leadership, with the stock price rising from 93.2p to 1285.5p. The company’s transformation will be highlighted in its upcoming annual results, with operating profit and free cash flow expected to exceed £3bn.
The comprehensive support from major shareholders for the proposed changes, led by Lord Gadhia, chair of the remuneration committee, underscores the success of Rolls-Royce’s corporate turnaround. Shareholders believe that management should be rewarded for the value creation that has benefited investors. The details of the new remuneration policy will be included in Rolls-Royce’s annual report in March.
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