The man who signed off a £170m pay deal for fat cat bosses at Melrose was yesterday named the firm’s chairman.
In a move that raised eyebrows in the City, Justin Dowley was promoted from head of the remuneration committee to chairman of the company as part of a boardroom shake up designed to quell concerns about corporate governance.
But the move – just months after the firm’s £8 billion takeover of British engineering and defence stalwart GKN – sparked concern among critics who questioned whether the 63-year-old was the best person to oversee the top team.
End of an era: Melrose confirmed plans to start breaking up GKN, which makes parts for the Blackhawk helicopter
He has been with Melrose since 2011 and last year his committee signed off an incentive plan that saw Melrose bosses David Roper, Simon Peckham, Christopher Miller and Geoffrey Martin paid a total of £170m – or more than £40m each.
Dowley’s move is part of an overhaul at Melrose that will see the chairmanship turned into a non-executive role in a bid to appease critics who claimed there was no independent oversight at the FTSE100 firm.
Miller, who was executive chairman, will become a second executive vice- chairman with Roper, alongside chief executive Peckham.
One senior City corporate governance expert said the leadership structure with its three executive roles blurs accountability.
He said: ‘It’s hard as an outsider to know where the real power lies – who is running the company?
‘Normally the chief executive is the key position and the share price goes up or down when a good or bad person goes into that position. But when you have got three people who are in similar positions – where is the power? For investors, whose company are they buying?’
Luke Hildyard, director of the High Pay Centre, said: ‘Moving to a non-executive chairman role is a positive development in that it puts a bit of distance between them.
‘But if it’s somebody who already has been involved with the company and has had responsibility for those contentious pay rewards, there will obviously be some scepticism as to whether he is going to be a properly independent overseer.
He added: ‘The new corporate governance code asks companies to consider how they pay their chief executives compared to wider workforce. One wonders how seriously the remuneration committee chair who lavished £40m on them is going to take that.’
Melrose shot to prominence earlier this year when it bought GKN for £8bn following a hostile takeover bid opposed by the Mail due to concerns about asset stripping.
Yesterday it confirmed plans to start breaking up the 259-year-old firm which supplied cannonballs for the Battle of Waterloo and makes parts for the Blackhawk helicopter (pictured above). Melrose has hired advisers to ‘explore strategic options’ for the powder metallurgy division, which is expected to be sold for nearly £2 billion.
Raiusing eyebrows: Justin Dowley was promoted to chairman
It has also hired bankers to sound out buyers for the Off-Highway Powertrain division, which makes drive-shafts and gearboxes.
Melrose made an overall loss for the half-year of £303m, with the GKN acquisition including advisers’ fees taken into account. With those costs stripped out, profits rose from £131m to £240m.
Bosses said they had found no ‘black holes’ in GKN since taking over, and are increasing the interim dividend to 1.55p per share, an 11 per cent increase on last year’s 1.4p per share.
Miller told shareholders: ‘Your board has determined that it is the appropriate time for the role of chairman to become non-executive.
‘Justin joined Melrose with a wealth of experience in 2011 and has made a highly valued contribution since.’