Investments in Nigeria must be better evaluated, the report says
The head of a government-owned body which helps to tackle poverty in developing countries earned £970,000 last year, it has emerged.
The CDC Group, a fund management firm which invests in companies in poor countries, said the pay reflected an exceptional 2007 performance.
But Edward Leigh, chairman of the MPs' committee which monitors public spending, described it as an "insult".
The firm is publicly owned but has not received government money since 1995.
CDC boss Richard Laing and other managers had "comfortable" pay deals, said Mr Leigh, the Conservative chairman of the Public Accounts Committee.
Established as the Colonial Development Corporation in 1948, CDC is responsible for channelling investment into many of the world's poorest countries by supporting promising and growing businesses there.
In its report on CDC's performance, the National Audit Office concluded that it had "exceeded" financial targets set in 2004, when the body was restructured, and obtained a "good return" on public funds.
But it expressed concerns about the Department of International Development's (DFID) oversight of the company on issues such as executive pay and reporting of performance targets.
It found the firm had awarded its executives pay packets "well above" levels set in 2004, after the organisation exceeded performance targets.
Pay and levels had been compared with those of other senior staff in development finance institutions, pension funds and private equity "fund of funds" - but that was changed to a comparison with the private equity firms only, where pay was significantly higher.
Mr Laing's pay went up from £383,000 in 2004 to £970,000 last year while average remuneration for senior executives was £435,000 in 2007.
Mr Leigh said some managers were being paid up to twice as much as conceived by ministers in 2004.
He told the BBC CDC appeared to be well run and its financial performance was "quite strong" .
But he said he was concerned it had £1.4bn "in cash in the UK which is more than it actually disperses" and that it appeared to fund a lot of businesses in places like China, South Africa and India which were "not the poorest of poor countries".
And he criticised staff performance bonuses: "This is not a private company, Dfid actually owns it. Do we need to pay the chief executive £970,000 a year?"
He said a bonus structure appeared to have been created to reward financial performance, which could encourage investment in stronger economies, while Dfid was supposed to help "the poorest of the poor".
"I think that paying an income of nearly £1m to somebody who works in an entirely publicly-owned company is an insult to the millions of people living on $1 a day, and the tens of thousands of charity workers who are slaving away on tiny salaries."
The NAO report found that the organisation's current cash reserves were larger than its overall level of investments, something that it said CDC had agreed to rectify.
"CDC will have made a credible contribution to economic development in these countries," said Tim Burr, head of the National Audit Office.
"But the scale of that contribution, or the direct effect on poverty reduction for poor people, is harder to demonstrate. DFID needs better evidence on the scale of CDC's impact."
The Conservatives said CDC's financial performance should be "applauded" but expressed alarm that ministers were "failing to keep a close eye" on aspects of its activities.
"It is deeply worrying DFID is failing to demand real evidence of the impact of CDC in reducing poverty and that it failed to keep tabs on executive pay," said shadow international development spokesman Andrew Mitchell.
CDC said it would carefully look at the NAO's recommendations and welcomed the "endorsement they give to CDC's mission of alleviating poverty by helping private sector growth in developing countries".
On the issue of pay, a spokesman said its chief executive's salary was "strongly performance-related" and had the backing of ministers.
"CDC's pay arrangements, as set out in conjunction with DFID, are deliberately designed to attract the best investment professionals to work in often very challenging markets," he said.
International Development Secretary Douglas Alexander defended the CDC and told the BBC: "In the first instance we need to recognise that this is an organisation that was worth a billion pounds and that is now worth £2.7 billion.
"So we have seen significant growth and it has not received a penny of public money since the mid-1990s."
He said he had set out new investment targets for CDC to ensure 75% of its investments went to the poorest countries, particularly in sub-Saharan Africa.