James Moore: The Devil's in the small print of annual reports

Outlook It's not just bonuses that are a problem when it comes to pay at the top of corporations generally. Over the last couple of days I've highlighted the problems created by carefully disguised extras squirrelled away in the fine print of annual reports.

These include retention packages that are in effect worthless to shareholders and pension plans which allow executives to retire to the Bahamas even if they run their companies into the ground.

The TUC's PensionWatch yesterday, as predicted, cast an unflattering light on recent practice.

It's often stated that if you want top performance you need top people. Trouble is, retention bonuses typically aren't linked to performance, and neither are pensions. Executives get paid simply for twiddling their thumbs. Yet institutional investors appear to think that they're doing their job by voting against a few annual reports in a one-off "shareholder spring".

Small wonder that when, in 2010, the Local Authority Pension Fund Forum and the National Association of Pension Funds wrote to the chairs of companies in the FTSE 350 calling for proper disclosure (which would at least provide a better picture of what's going on) they were ignored.

Greater radicalism is required. Amending the Combined Code on Corporate Governance might be an option. It could stipulate that bosses' pension contributions should be no more as a percentage of salary than a company's staff (they'd still get a generous bung because of the size of those salaries). Retention packages could be dealt with by demanding an explicit link to performance.

The other route is for the Government to bring forward legislation. Given the City's inaction, that may ultimately be the only way forward. Wake up, Vince Cable.

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