Controversy over pay at taxpayer-backed firms is expected to be stoked as Direct Line plans to hand out multimillion-pound share bonuses to bosses when it floats on the stock market, it has been reported.
Insurance giant Direct Line Group - which is owned by part-nationalised Royal Bank of Scotland - is set to offer its chief executive Paul Geddes and finance chief John Reizenstein "golden handcuff" deals designed to lock-in senior staff following the initial public offering, according to The Sunday Times.
Mr Geddes is thought to be in line to receive a long-term incentive package worth around £3 million in shares when the Churchill and Direct Line insurance firm makes its stock market debut.
Direct Line declined to comment, but it is understood the bonus schemes will pay out only if the senior staff hit performance targets and stay at the firm for at least three years. The potential windfalls could create a backlash amid public anger over pay at part-nationalised banks, while it may also anger staff as Direct Line cuts jobs.
Direct Line Group announced proposals earlier this month to axe nearly 900 roles and close a site in the North East.
The group, which employs some 15,000 staff in the UK, is planning the redundancies under plans to make £100 million of cost savings by the end of 2014.
RBS, which is 82% owned by the State, revealed plans to spin off Direct Line on Friday. It must sell its interest in Direct Line Group, which also includes the Green Flag and Privilege brands, under a European-imposed condition of its £45 billion government bailout received in 2009.
RBS must sell a majority stake in Direct Line Group by the end of next year and divest of the entire company by the end of 2014.
Around 25% or more of Direct Line will be offered in the initial share sale with additional tranches to follow.
Direct Line Group, which has 4.2 million personal motor policies and 4.3 million home insurer policies in force, should be worth around £3 billion, according to analysts.