Page last updated at 17:13 GMT, Thursday, 12 March 2009

Reckless bosses 'must be stopped'

Lord Myners
Lord Myners failed to stop Sir Fred Goodwin's pension deal

Pension fund managers must be more active in challenging company bosses to stop them making reckless decisions, the Treasury minister has said.

Lord Myners also suggested staff should have a say in deciding how much their bosses earn in salaries and pensions.

He was speaking in Edinburgh to the National Association of Pension Funds.

He said a lesson of the recession is that institutional investors have to address the control or governance of companies.

Lord Myners, a former pension fund manager, told the meeting: "This issue is now a hot topic. The penny has dropped in that sound governance is not a 'nice to have'. It's a necessity.

Coalition of small shareholders often have more influence than single organisations
Lord Myners

"Disengaged investors lead to ownerless corporations and the risk of unaccountable executives and boards running amok. This carries with it very substantial economic risk."

"Too often, shareholders are disunited," said Lord Myners, the minister responsible for the finance sector.

"Boards complain they hear conflicting views from shareholders and individual shareholders can become isolated. Coalition of small shareholders often have more influence than single organisations acting alone."

Pay consultants

Lord Myners recently gained notoriety as the minister who failed to stop Sir Fred Goodwin leaving as chief executive at the Royal Bank of Scotland with a 703,000 pension.

But at the conference he said executive pay had to be perceived as fair, and that directors should not rely on pay consultants to ratchet up the pay rates by comparison with other senior executives, without linking it to performance.

He added: "To support shareholder action we need remuneration committees that are open to a wider range of views.

"Should they, for instance, consider formally seeking views from investors, employees and their representatives?"

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