David Prosser: Golden hellos make it too easy for overpaid directors to say goodbye

Outlook There will be no shortage of people anxious to complain about the size of the pay deal handed to Antonio Horta-Osorio, the new boss of Lloyds Banking Group, as detailed in the bank's annual report yesterday. But the truth is that Mr Horta-Osorio is being paid the market rate, with much of the remuneration dependent on his performance over the next four years.

One part of the package does stick in the craw, however: the £4.1m-worth of shares granted to Mr Horta-Osorio as compensation for benefits he gave up when he left Santander, his previous employer. It's not the size of the award that rankles, but the principle of this sort of golden hello.

The benefits in question were granted to Mr Horta-Osorio in relation to long-term performance. They were intended to give him additional incentives both to make a success of running Santander and to stick around long enough to show that he had done so. Having failed to stay at the Spanish-owned bank until he qualified for those benefits, why should Lloyds' shareholders be expected to compensate him for missing out?

The answer the bank will give should you put the question to it is that it wants to attract the besttalent possible and that this is the sort of thing you have to do to meet that ambition. Lloyds is right, of course, because compensating executives for forgoing long-term incentive plan pay-outs at their previous employers has become par for the course at the top levels of our publicly owned companies.

That makes a mockery of such schemes. If the chief executive of a company knows they will get paid even if they choose to jump ship to a rival, what's the point of having an incentive plan designed to reward their loyalty? Now every company behaves in this fashion, there's no point in any of them offering long-term reward deals.

For chief executives on thecorporate merry-go-round, this has become something of a racket. They can sign up to a reward plan that pays out in five years time, say, but they don't have to worry about being around on judgement day, because they know any rival seeking to secure their services will have to make good on the promise.

The extraordinary inflation seen in directors' pay in Britain over the past 20 years – both absolute and relative to what most workers earn – is bad enough. The way in which executives now have employers over a barrel – and not just in the banking sector – is indefensible.