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Thursday, 8 March, 2001, 14:10 GMT
Labour targets 'fat cat' pay
Robert Ayling
Sacked BA chief Bob Ayling received a 1m pay-off
Labour says it plans to force companies to reveal details of directors' salaries and bonuses in a long-awaited clampdown on boardroom 'fat cats'.

Under new proposals, companies will be forced to give a detailed breakdown of directors pay in their annual report.


If ministers are starting to remove the bowl from the fat cats, they will be cheered to the rafters

John Edmonds, general secretary, GMB
They will also have to account for individual directors' remuneration packages and the role of a board's remuneration committee.

The plans, unveiled on Wednesday by Trade and Industry Secretary Stephen Byers, are designed to strengthen the link between directors' pay and performance.

'Sickened'

They have been welcomed by the unions, who have waged a campaign against escalating directors salaries and perceived boardroom greed.

TUC general secretary John Monks said: "They are a significant step towards greater accountability and will help to restrain the worst fat cat excesses."

John Edmonds, general secretary of the GMB union, said: "People have been sickened by the excessive salaries that some executives have been paying themselves.

"If ministers are starting to remove the bowl from the fat cats, they will be cheered to the rafters."

'Golden Hello'

Public anger at 'fat cat' salaries erupted in 1995 over a pay rise given to Cedric Brown, chief executive of the newly-privatised British Gas and boardroom bonuses at lottery operator Camelot.

Last year, unions and shareholders tried to block a 10m 'performance' bonus awarded to Vodafone chief executive Chris Gent, following the takeover of German mobile phone group Mannesmann.

Controversy also surrounded a 1m pay-off to sacked British Airways boss Bob Ayling and a 2m 'golden hello' for Marks & Spencer chief executive Luc Vandaevelde.

However, the government's proposals are unlikely to go down well with business, which argues that UK companies must be able to pay top wages to attract world class executives.

'Conflict of interest'

Mr Byers said: "Companies and shareholders around the world increasingly recognise the importance of a proper link between pay and performance in the boardroom.

"In the US, companies are already required to publish performance measurement comparisons.

"I believe we should do the same."

Boards of directors faced an "obvious conflict of interest" in relation to directors' pay, he said.

"This significant package of new disclosure rules will help to ensure that shareholders have the necessary information to enable them to assess a company's policy on boardroom pay."

The government was "concerned" that many firms were failing to respond adequately to recommendations on accountability.

'Tougher sanctions'

Ministers will decide whether to introduce a compulsory vote on a board's remuneration report following a review of company law reform.

Mr Byers said he would look for evidence that shareholders were fully involved in directors' pay rates and that remuneration committees were composed exclusively of independent, non-executive directors.

Mr Byers had been expected to unveil the proposals last year, following a government-backed report into directors' pay.

But the plan was reportedly delayed by rows over the severity of the measures, with chancellor Gordon Brown thought to favour even tougher sanctions.

The announcement, on Wednesday, was overshadowed by Mr Brown's budget.

It had been expected to be delayed until after a general election.

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See also:

10 Sep 00 | Business
TUC demands 'fat cat' pay action
21 Sep 00 | Business
The rise, fall and rise of Camelot
10 Mar 00 | Business
BA looks for new pilot
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