New Rolls-Royce chief in line to earn more than €6m

The new chief executive of Rolls-Royce could earn more than £6 million (€6.7 million) this year in salary and shares if he meets all of his annual performance targets, putting him among the higher earners in London’s blue-chip FTSE 100 index.

Tufan Erginbilgic, who took the helm of the British engineering group in January, will be paid a base salary of £1.25 million, of which 30 per cent will be in shares held for two years, according to the company’s annual report published on Thursday.

Under an incentive plan, all of which will be paid in shares, the 63-year-old’s pay package could rise to £6.24 million in 2023 if he meets certain targets.

According to data compiled by the High Pay Centre think-tank last year using pay awards for 2021, it would put Mr Erginbilgic among the top 20 FTSE 100 chief executives.

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In its report, Rolls-Royce’s remuneration committee said it had agreed that Mr Erginbilgic’s targets would be “based solely on in-year targets agreed in early 2023, ensuring that his reward reflects business performance from the start of his tenure”.

“The targets focus on the key drivers of transformational performance which will underpin future strategy,” said the report.

While the actual targets were not disclosed, they include metrics for free cash flow and operating profit. Under the terms, 40 per cent of shares awarded have to be held for three years and 60 per cent for four years.

Warren East, Mr Erginbilgic’s predecessor who steered Rolls-Royce through the Covid-19 pandemic that led to the grounding of most of the world’s global aircraft fleet, by comparison received £3.83 million in 2022, including £2.7 million under an incentive plan. East was forced to launch a sweeping restructuring including the loss of 9,000 jobs to save £1.3 billion.

The company’s remuneration committee said in the report that it felt Mr Erginbilgic’s salary “reflects the complexity of the markets that we operate in, the technology and the ongoing transformation needed to restore the balance sheet and to return Rolls-Royce to an investment grade credit rating”.

Shares in Rolls-Royce have surged 49 per cent since the start of the year on the back of better than expected full-year results and investor expectations of a turnaround under Mr Erginbilgic. They were trading at 147p on Thursday afternoon.

The potential pay package for this year comes after Rolls-Royce said last year that Mr Erginbilgic would be compensated for missing out on rewards he could have had at his private equity employer with the award of two tranches of shares worth £3.5 million each at the date of grant in March 2023. The two awards will vest in 2027 and 2028.

Rolls-Royce said Mr Erginbilgic’s remuneration was “in line with the policy approved by our shareholders in 2021 and what we communicated when we announced his appointment in July 2022″.

“His pay reflects his background in private equity and his proven record for leadership and delivery in complex global industrial organisations. He has been set stretching targets for 2023 and 30 per cent of his salary and all of any bonus he might get will be in shares which must be retained for multiple years.” – Copyright The Financial Times Limited 2023