Derek Pain: Corporate fat-cat pay reductions> I wouldn't bet on it

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The Independent Online

Are company directors paid far too much? Politicians think they are and so, I suspect, do the vast majority of small shareholders. But will legislation be introduced to curb the corporate fat cats? I doubt it. For one thing new rules would be almost impossible to police and, in addition, any self regulation is unlikely to succeed because many of the most powerful shareholders in top ranking companies are already enjoying a similar gravy train ride.

You and I may blink in astonishment at some of the money handed out. Investment organisations, like advisory group PIRC, often mount commendable onslaughts at company annual meetings against cash and share packages. But their efforts rarely quell the demands for increased rewards. Why? Because objections cut little ice with the City institutional fund managers that dominate many share registers. Most of them are already enjoying privileged pay packets. Although they represent small savers (through managing pension funds and so on) many obviously feel obliged to support the various remuneration deals. And don't forget, auditors, and other outside professionals such as lawyers, are also richly rewarded. So the City is collectively supportive of the fat-cat mentality.

The pay spotlight is focussed on the top echelons. Yet among smaller companies some large wage demands are approved. It is all part of the money grabbing sentiment that also embraces the likes of pop stars and elite professional footballers as well as many in Whitehall and local government. Yet while the rich get richer the finances of most of us are being squeezed unmercifully.

Some politicians could be accused of political grandstanding. Why single out company executives? Big pay packets are enjoyed by many. Will, for example, council executives be subject to any Westminster-inspired initiative? Wage controls are difficult to enforce. When in the 1970s a pay freeze was introduced, there was a sudden rush to capture new working titles that, of course, embraced higher pay although the job functions remained essentially unchanged.

I suppose the pay row offers a diversion from the turmoil reigning in stock markets. Yet according to Capita registrars, private buyers – although losing some £34bn so far in this year's wounding share slump – have still had the sense to take advantage of lower prices by buying around £1.3bn-worth of stock. It is against such turbulent background that the City's Takeover Panel has introduced new bid rules that are a direct result of the controversial acquisition of Cadbury by US food giant Kraft.

The changes were not expected to graft on any extra protection for iconic – or essential – British companies, but they do offer some help to businesses on the receiving end of bids. Announcements about "preliminary approaches" are likely to become more frequent. One area where controversy and intrigue are likely to remain, however, is when a substantial shareholder is on the share register but not in the boardroom.

Sir Stelios Haji-Ioannou has made his presence felt at easyJet, the group he founded and where his family still has around 38 per cent of the capital. His decision to launch a rival airline could, however, prompt a disconnection.

Joe Lewis, the Bahamas-based billionaire, appears to have snapped up a bar stool at Mitchells & Butlers with his 22.8 per cent shareholding. Two directors are his nominees. M&B has had an eventful time in recent years with the Lewis influence adding to the feeling that something akin to a bar room brawl is taking place at the pub chain. The chairman, Bob Ivell, and chief executive, Jeremy Blood, describe their roles as "interim".

Through his investment company Mr Lewis has tabled a low ball 222p bid and has indicated he could well go to 230p a share. With its revolving boardroom door M&B has probably missed a trick or two in recent years but seems to be performing quite well.

The shares have been in the doldrums. Early last month they were standing at an all-time low, near 200p. Since the Lewis bid approach became known they have displayed some life, reaching 250p or so. Clearly Mr Lewis has no plans to revisit the days when, under the then chief executive Tim Clarke, the shares nudged 900p. But a bid price well in excess of the current one would be more appropriate.

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