BT and PO pension funds backed Gas 'fat cat' pay

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The Independent Online
PENSION funds representing Post Office and British Telecom workers voted to save Cedric Brown, chief executive of British Gas, at last week's angry meeting of shareholders.

Managers of the miners' pension fund are also thought to have backed Mr Brown's 71 per cent pay increase. So are the fund managers for BBC employees and for workers at Associated Newspapers, publisher of the Daily Mail which has vigorously criticised Mr Brown's salary.

The revelations, made public by the Labour Party yesterday, coincide with new proposals by the Shadow Chancellor, Gordon Brown, to tackle the City's "block vote" by forcing pension funds to make their voting decisions more transparent.

He said: "Millions of pensioners will be horrified to learn that their funds have been used to support boardroom excess. The whole question of institutional shareholders voting needs radical reform with more openness and accountability."

Alan Johnson, general secretary of the Union of Communication Workers, said he would seek "an explanation from those who are elected to represent our interests". The decision was "surprising and disappointing".

Despite rowdy scenes and the opposition of most individual shareholders at last Wednesday's annual general meeting, the British Gas board won with the support of the big investors. Most pension funds backed the British Gas remuneration package, but they are under no obligation to admit how they voted.

Those known to have backed the British Gas board include Hermes, which manages the Post Office and BT pensions.

Others thought to have backed the board include CIN Management, which manages the former British Coal's pension fund, M&G Group, which manages the BBC fund, and MIM and Rothschilds, which manage the Associated Newspapers fund.

Additional investment funds which backed the board include Prudential, Standard Life and Mercury Asset Management. Those voting against included local authority funds, Scottish Amicable and Sainsbury's pensions fund. In an editorial last week, the Daily Mail argued: "It doesn't matter if the army of small shareholders in British Gas is united in disgust at the vast remuneration packages awarded to the likes of Cedric Brown. He and his fellow board members are protected because the big financial institutions are too timid to rock the boat."

None of the companies was prepared to confirm which way its pension fund voted. Most say that they are not consulted on the investment decisions.

But Labour's Economic Policy Commission is proposing measures to curtail the freedom of the pension funds and big companies to act in secrecy.

One paper, "Economic and Employment Opportunities for All", will argue for "disclosure of each director's pay package to shareholders", and an obligation on companies to seek approval before executives receive pay.

The second document, "A New Economic Future for Britain", will call for a "commitment to transparency" giving fund managers the "responsibility to justify the way they vote at AGMs". Labour also wants a code of conduct.

Business, page 16