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Rolls-Royce is preparing to hand its chief executive a lucrative annual pay rise as part of a new remuneration policy following the company’s spectacular turnaround.
Under the revamped policy, Tufan Erginbilgiç’s annual bonus entitlement will increase from 200 per cent of his base salary of just over £1.1mn to 300 per cent. His long-term incentive awards will go from a maximum of 375 per cent of salary to 750 per cent.
As a result Erginbilgiç’s total package of salary, annual bonus and long-term incentive plan could top £13mn. In 2024, he took home £4.1mn in pay and bonuses.
The new policy, which will be presented to shareholders for approval at Rolls-Royce’s annual meeting in the spring, has the backing of the company’s top 20 investors, according to people familiar with the situation.
The consultation with shareholders was triggered in part by concerns over how to retain talent, one of the people said. They added that the aim was to bring Erginbilgiç’s remuneration more closely into line with those of executives at its aerospace and defence competitors. Sky News first reported the details of the proposal.
Since joining Rolls-Royce three years ago, Erginbilgiç has delivered a sweeping restructuring of the company whose engines power many of the world’s biggest airliners as well as submarines and military jets. Shares in the group have increased by more than 1,200 per cent since January 2023, taking its market value from just under £8bn to over £100bn.
The former oil executive is already in line for a share-based reward that could exceed £100mn.
Erginbilgiç received 8.3mn shares when he joined to compensate for lost earnings and bonuses from his previous employer, the private equity firm Global Infrastructure Partners.
The shares, which vest in two tranches in 2027 and 2028, were granted in March 2023 at a price of 90.8p per share. Rolls-Royce shares closed at £12.80 on Friday, giving him a paper gain of just over £106mn. The potential payout would rank among the largest for a UK-listed company.
Although the shares will only vest if Erginbilgiç continues to work at Rolls-Royce, some analysts have questioned how long he will remain at the company after 2028.
Rolls-Royce said the “step-change” in the company’s performance “coupled with competitive pressures in the external environment for world-class talent” necessitated a review of the remuneration policy.
“This is a proactive measure initiated by the remuneration committee with the full support of the Rolls-Royce board,” it said.
