COMMENT: Fat cats stalk Britain's boardrooms again

`The rights and wrongs of each case must be judged individually, but the cumulative effect of the headlines is likely to be serious stuff for the Government in the run-up to the election'

Executive pay in Britain seems as inextricably linked to what is happening in the US as the stock market is. Business Week this month chronicled how greed in the boardroom was taking off again, just in time to be an awkward issue for the pro-business Republicans as presidential elections approach.

The same thing seems to be happening in Britain. Disclosures so far in the current reporting season suggest another executive pay scandal in the making. Embarrassment in the boardroom at the political and shareholder impact of last year's fat cat scandals seems to have had little impact. This week we have had BP paying out a cool quarter million to Bob Horton, the former chairman who left in 1992, while Commercial Union set a brisk pace in the insurance industry with a 26 per cent rise for John Carter, its chief executive. Then there has been the ill-timed verdict of ICI's remuneration committee, which approved a 42 per cent pay rise for Sir Ronald Hampel, chairman of the Cadbury Committee Mark II on corporate governance. Sir Ronald will be reviewing the operation of the Greenbury rules on executive pay, presumably in favour of those who want excess.

To cap it all, we now have the pounds 2.1m pay package over 18 months of Sir Richard Sykes, chief executive of Glaxo, accompanied by a juicy performance scheme that could eventually pay out millions more. These are the sort of rewards that should go to entrepreneurs, rather than people who are essentially managers. In Sir Richard's case. it surely would have been right to have awaited the success or otherwise of the Wellcome merger before paying out such wealth.

The rights and wrongs of each case must be judged individually, but the cumulative effect of the headlines is likely to be serious stuff for the Government in the run-up to the election.

Fresh voices raised against Mr Murdoch

Regulation seems to have become about the only growth industry in Britain. If there's a problem, regulate it, is the general rule. With so many growing empires jostling for position, it is hardly surprising they should start to tread on each other's toes.

The latest to do so is Don Cruickshank, the telecoms regulator. Now he's trying to gain jurisdiction over Rupert Murdoch, whose interests, though they stretch far and wide, do not yet include telephones. He wants Mr Murdoch's BSkyB to alter the terms on which it supplies the cable industry with pay-TV channels, and has so recommended to the Office of Fair Trading, which is investigating the issue.

Mr Murdoch has seen off the US House of Representives, the Australian Government and the woefully ineffectual Office of Fair Trading on many occasions in the past. Mr Cruickshank may be another matter. He has spent the last few years honing his combat skills on the mighty BT, forcing prices down and encouraging the competition to flourish. Most recently, he has sought sweeping new powers against anti-competition practices in the telecommunications market.

That, it seems, is not enough to keep him occupied. He now wants to take on Mr Murdoch's stranglehold on the pay-TV market, which in Mr Cruickshank's view is theatening the health of the cable telephony business. His solutions are based on the same, interventionist approach he has perfected in his dealings with BT.

Of course, he has no power to impose his remedies on the pay-TV market, but his hard-hitting recommendations to the OFT could nevertheless help set the agenda for change. Not everyone appreciates his zeal for reform. Just ask the Independent Television Commission. But given how little has been done to date to rein in Mr Murdoch, maybe we should be listening to some fresh, and tough, voices.

The right strategy for Guinness

The instinctive reaction to share buybacks is to question what managements are being paid for if it is not to think of ways to invest the cash their companies generate. If Guinness has accepted, as it appears to have done, that building brands can only be achieved with a huge marketing push, then it could be argued that pounds 460m would be better spent backing Johnnie Walker, Gordon's and the famous black stuff than giving shareholders an Easter bonus.

Like most knee-jerk reactions, this one is probably wrong. There is a limit to how much can sensibly be spent on promotion and at pounds 500m last year, with a promised double digit increase this time, Guinness is close to the point at which it starts throwing money at campaigns just because they are there and not because they are likely to generate a decent pay- back. The Cruzcampo debacle is a salutary reminder of what can happen when cash is spent in haste.

Buying back only half the number of shares for which it gained permission at last year's annual meeting is a sensible compromise, leaving the door ajar on the two most widely rumoured corporate deals: acquiring the two- thirds of Moet Hennessy it does not yet own or, less likely, a tilt at struggling Allied Domecq's spirits arm. For the time being, buybacks also remain a highly tax-effective way of delivering value to to big, gross fund shareholders.

Tony Greener, the chairman, has been preaching the current stock market mantra of focus for some time now, so it should come as no surprise that he sees his job as growing the core business as fast as he sensibly can and handing any cash he can't use to that end back to its owners. Clearly this does not produce fireworks in the share price, but while the world market for spirits and beer remains so dull, it's probably the right strategy. Bernard Arnault of LVMH, Guinness's biggest shareholder, may not necessarily agree but then he has a rather different different agenda; eventual control of Guinness's liquor interests.

Expect a hiccup from the mad cow scare

The pound lost half a pfennig and gilts fell by nearly a point yesterday. An over-reaction to the mad cow scare? The City's instant analysis focused on the worst case - all 11 million cattle slaughtered, the dairy industry destroyed and no substitution for beef by other British meats. This nightmare scenario is unlikely, but a hiccup in the economy seems the very least we can expect.

It is impossible to quantify the likely effects until scientists can say how many people might fall ill, until the Government reaches a decision about how many cattle must be slaughtered, until the extent of bans overseas is known - and until British consumers decide whether to abandon beef altogether. The one thing that is certain is that the public sector borrowing requirement will be higher, by anything between hundreds of millions and billions of pounds. The markets looked at the bottom line - and probably got their judgement about right.

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