Rolls-Royce Holdings is to hand its chief executive a multimillion-pound annual pay boost, even as he nears one of Britain’s most lucrative ever public company payouts after overseeing a spectacular revival of the industrial manufacturing group.
Sky News has learnt that Rolls-Royce’s board has concluded a consultation with leading shareholders on a radical overhaul of its remuneration policy.
The proposals, which have been endorsed by top investors, will see Tufan Erginbilgic’s annual bonus entitlement increase from two times to three times his base salary of about £1.2m.
The revamped scheme will also see his long-term incentive award will double from a maximum of 375% of salary to 750% – making it one of the richest such rewards programmes offered by a FTSE-100 company.
Under the plans, Mr Erginbilgic’s overall package of salary, annual bonus and LTIP award will rise to a maximum of more than £13m.
Mr Erginbilgic, who joined Rolls-Royce at the beginning of 2023, has engineered a stellar recovery for the company, which had been left fighting for its survival after the COVID pandemic brought global aviation to a near-standstill.
He described the company, which supplies engines for the world’s leading airlines and is playing a key role in the development of small modular reactors as a source of new nuclear power, as “a burning platform” and said it had been poorly managed.
City sources said this weekend that the recent announcement of a change of leadership at BP, where Mr Erginbilgic used to work, had highlighted to the Rolls-Royce board the risks of losing him to another blue-chip corporate job.
Paradoxically, however, Mr Erginbilgic is likely to earn far less under the new pay policy than he will have done under its existing one.
That is a function of the scale of the stock awards handed to him when he joined Rolls-Royce, with its share price in the doldrums.
He was given 8.3 million shares – which at the time were worth £7.5m, and are now valued at about £107m.
Last year, Mr Erginbilgic earned £4.1m, with the prior year’s figure of £13.6m inflated by a £7.5m one-off award to compensate him for money he forfeited by leaving his previous employer, the investment firm Global Infrastructure Partners.
A Rolls-Royce spokesperson said: “The step-change in Rolls-Royce’s performance, coupled with competitive pressures in the external environment for world-class talent, necessitates a review of our remuneration policy.
“This is a proactive measure initiated by the remuneration committee with the full support of the Rolls-Royce Board.
“A revised remuneration policy is planned to be presented for shareholder approval at our 2026 AGM.”
Rolls-Royce’s valuation has multiplied more than 12-fold since Mr Erginbilgic took the reins, with the shares languishing at just 93.2p on the day prior to him joining 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 between £3.1bn and £3.2bn of operating profit and free cashflow of more than £3bn.
Full details of the new remuneration policy will be outlined in Rolls-Royce’s annual report in March.
However, the company is understood to have seen the proposals drawn up by Lord Gadhia, the Conservative peer who chairs Rolls-Royce’s remuneration committee, given the comprehensive backing of its leading shareholders.
“As a top ten shareholder of Rolls Royce we are supportive of the changes to the remuneration policy,” Stephen Anness, head of global equities at Invesco, said.
“We struggle to think of a more successful corporate turnaround and resulting value creation.
“Shareholders, our end investors, have benefitted enormously from that value creation and we believe management should be rewarded for that.
“We have seen many examples of egregious pay for poor performance; this is the opposite.”
This weekend, Rolls-Royce declined to comment on the details of its new remuneration policy.