Exchange told to delay new rules on top pay

PETER RODGERS

Business Editor

Leading companies have been pressing the Stock Exchange to delay implementation of new rules on top pay - due to be published today - for more consultations, particularly about the powers and independence of remuneration committees.

The new rules, based on the work of the Greenbury Committee on executive pay, are in the form of alterations to the Stock Exchange yellow book, which governs the conduct of listed companies.

One key area of difficulty is the Greenbury committee's proposal that remuneration committees should be composed of independent non-executive directors, with a chairman accountable directly to shareholders.

This appears to conflict with the current legal position that all directors are responsible for the running of a company, with the chairman speaking for the board as a whole.

There are concerns that the new rules will turn the independence of remuneration committees into a legally binding requirement, without addressing the conflict with the more general obligation of all directors to the company.

This is one of a number of areas where companies believe the new rules are likely to be too inflexible. The rules have been drawn up after two months of consultation since a draft of the changes was published on 31 July.

The CBI, which set up the Greenbury Committee in January, is broadly supporting the Stock Exchange's revisions but many of its members would prefer to have seen a greater emphasis on voluntary codes.

It also emerged that the CBI is pushing for Budget rethink on tax treatment of share options. Employers were caught off guard in the summer when Kenneth Clarke abolished capital gains tax relief on share option profits.

The CBI believes he should switch to levying income tax on profits when shares are sold rather than when options are exercised. Without the change there will be a disincentive to managers to hold shares in the companies they work for, because of their liability for tax on the unsold shares immediately the options are exercised.

Meanwhile, Mr Clarke was threatened with a backbench revolt when parliament reassembles unless he reverses his abolition of the tax relief.

And at a Bow Group meeting in Blackpool, Tory backbencher David Shaw and stock broker John Marshall MP linked with Lord Wolfson, Chairman of Next, and Archie Norman, chief executive of Asda to attack abolition. Mr Norman described the chancellor's decision as "a simple cockup".