Leading Article: Mr Byers is right not to skin the `fat cats'

STEPHEN BYERS, the very model of a modernising New Labour Trade and Industry Secretary, has a populist touch. Not only is he at ease with a dynamic market economy, he's also a whiz with the spin against capitalist "fat cats" - those plump targets of effective Labour propaganda before the election. At a speech in the City today, he's expected to set out his proposal for curbing boardroom excesses.

Thin stuff it is, too, which does not, of course, prevent it from sustaining Mr Byers' profile through the "spin cycle" of weekend newspaper briefings, speech, consultative paper and finally legislation. The policy itself has to be moderately ineffective, as serious state intervention is bound to be both economically and politically counter-productive.

Today's plan is just enough to allow Mr Byers both to reassure New Labour's business backers and, at the same time, to parade himself as the ally of the ordinary person against corporate greed.

The plan is to change the law so that companies have to put directors' pay packages to a shareholders' vote at annual general meetings. If that will help shift the culture of institutional shareholders towards taking a more active interest in the companies in which they invest, all well and good, but it must be doubted whether it will change much.

The public outrage against "fat cats" was very much an after-effect of the Tory privatisations. The presentational problem was that bosses of privatised companies moved with unseemly speed from public to private- sector pay levels. In rather fewer cases, the outcry was over the directors of poorly performing companies paying themselves more than they were earning for their shareholders. That has always been, as it should be, a matter for shareholders; they could always object to, or even reject, excessive pay packages. After all, they own the company, and can table resolutions at AGMs. The Government's role should be limited to taxing fairly rewards generated by the market.

If, by forcing directors to justify their pay once a year, Mr Byers' proposal shifts the burden of proving that company bosses are worth their money from shareholders to directors, it is to be welcomed. But it is, thankfully, a long way from the totalitarian implications of Labour's campaign against "fat cats" in opposition.