Rolls-Royce ‘Turbo Hurricane’ gets multimillion-pound annual pay raise, money news

Rolls-Royce Holdings will give its chief executive a multimillion-pound annual pay rise, even though he is close to one of Britain’s most lucrative public company payouts ever after overseeing the industrial manufacturing group’s spectacular revival.

The board of Rolls-Royce has consulted with major shareholders over an overhaul of its remuneration policy, Sky News has learnt.

The proposals, which have been backed by top investors, would see Tufan Erginbilgic’s annual bonus entitlement increase by two times to three times his base salary of around £1.2m.

The revised plan will see their long-term incentive award double from a maximum of 375% of salary to 750% – making it one of the richest award programmes offered by an FTSE-100 company.

Under the plans, Mr. Erginbilgic’s total package, including salary, annual bonus, and LTIP award, will increase to a maximum of more than £13 million.

Mr Erginbilgic, who joins Rolls-Royce in early 2023, has led a stellar recovery for the company, which was struggling for survival after the COVID pandemic brought global aviation to a near halt.

He described the company, which supplies engines to the world’s leading airlines and is playing a key role in the development of small modular reactors as a source of new nuclear energy, as “a burning platform” and said it had been poorly managed.

City sources said this weekend that the recent announcement of a leadership change at BP, where Mr Erginbilgic worked, had highlighted to the Rolls-Royce board the risks of losing him to another blue-chip corporate job.

However, paradoxically, Mr Erginbilgic is likely to earn much less under the new salary policy than under the existing salary policy.

This is a function of the scale of the stock awards he was given when he joined Rolls-Royce while its share price was in a recession.

He was given 8.3 million shares – worth £7.5 million at the time and now worth around £107 million.

Last year, Mr Erginbilgic earned £4.1 million, while the previous year’s figure of £13.6 million was boosted by a lump sum award of £7.5 million to compensate for money he forfeited after leaving his previous employer, investment firm Global Infrastructure Partners.

A Rolls-Royce spokesperson said, “The step-change in Rolls-Royce’s performance, combined with the competitive pressure in the external environment for world-class talent, requires a review of our remuneration policy.

The Remuneration Committee is undertaking this review with the full support of the Rolls-Royce Board.

“This is a proactive measure initiated by the Remuneration Committee with the full support of the Rolls-Royce Board.

“We plan to submit a revised remuneration policy for shareholder approval at the 2026 AGM.”

Rolls-Royce’s valuation has increased more than 12-fold since Mr Erginbilgic took charge, with shares standing at just 93.2p the day before he joined the company.

On Friday, the stock closed at 1285.5p, giving Britain’s proudest industrial name a market capitalisation of £108bn.

The scale of its transformation will be underlined in its annual results next month, when it has guided analysts to expect an operating profit of between £3.1bn and £3.2bn and free cash flow of more than £3bn.

Rolls-Royce’s annual report in March will provide full details of the new remuneration policy.

However, the company is understood to have viewed the proposals prepared by Lord Gadhia, the Conservative peer who chairs Rolls-Royce’s remuneration committee, with the broad support of its major shareholders.

“As a top ten shareholder of Rolls-Royce, we are supportive of the change in remuneration policy,” said Stephen Eness, head of global equities at Invesco.

“We struggle to think of more successful corporate transformations and the resulting value creation.

Our ultimate investors, the shareholders, have greatly profited from this value creation, and we believe that management deserves recognition for it.

“We have seen many examples of excessive pay for poor performance; this is just the opposite.”

This weekend, Rolls-Royce declined to comment on the details of its new remuneration policy.