It's still not too late to de-nobble Greenbury

City & Business

GREENBURY has been nobbled. One of the most important of the Greenbury Committee recommendations on top pay is to be dropped, it seems. As Paul Rodgers reports on page 3, quoted companies are not, after all, to be required to disclose the true cost of directors' pension entitlements. The original plan has certainly been delayed for six months. It looks likely to be watered down. It may even be scrapped altogether.

This was not some abstruse actuarial requirement. It goes to the heart of the debate about disclosure of executive pay. As every fat cat knows, their annual salary - as revealed in the annual report - tells only half the story about their total remuneration package.

With each year that passes, they also earn a growing pension entitlement. The true value of this entitlement is never revealed. Companies are only obliged to disclose a figure when the company pension fund is in deficit. Then when they do, the figure they quote is highly misleading because it is based on an average scheme contribution rate. As the whole sorry saga of 1990s boardroom excess has illustrated, directors are anything but average.

Canny directors have learnt that a hefty pay rise in their last year before retirement makes a vast difference to their take from the pension scheme. The actuaries' normal rule of thumb here is that a pounds 1,000 pay rise in the final year leads to an extra pounds 10,000 of total pension income during the remaining lifetime of the executive and his or her spouse. The chief executive who gets a pounds 100,000 pay rise in the pre-retirement year - and there are such people - receives an extra pounds 1m in due course from the pension fund. This is paid for either out of pension contributions made on behalf of less elevated employees, or from additional company contributions. Either way, it is the shareholders who bankroll this largess. They at least have the right to know that it is happening.

It is not too late for them to fight a rearguard action. Business has something to learn from the Commons here. Against all the odds, MPs are after all to be forced to disclose their outside earnings. If Nolan can escape being nobbled, so can Greenbury.

Pricing the railways

SUDDENLY, railway privatisation is upon us. Last week the three rolling- stock companies formed out of the broken-up British Rail were sold. As we report on page 7, Railtrack is busy grooming itself for a flotation. Preferred bidders for the first three train-operating franchises will be announced in the next fortnight, I understand. And there is keen interest from the construction industry in the 13 infrastructure service companies.

Already, however, there is a suspicion that some rail assets are being sold off too cheaply. Opposition politicians have been quick to point out that the rolling stock, which was valued at pounds 3bn last year, only fetched pounds 1.8bn.

The truth is that it is impossible to value any part of the broken-up railway in isolation. Each of the 70 companies formed from the old British Rail is dependent on others. Each company's worth is determined not so much by its physical assets, but by the long-term contracts it has signed with other parts of the railway. Thus the price fetched by the rolling- stock companies is determined not by some arbitrary valuation placed on their locomotives and carriages, but by the fact that the train operators are committed to paying them leasing charges long into the future.

Underpinning the entire artificial market-place are the subsidies the Government has promised to pay the train operators. The privatisation proceeds, the ongoing subsidies and the colossal fees paid to the myriad advisers will all have to be taken into account in any calculation of whether taxpayers are getting value for money. The National Audit Office faces a Herculean project.

Welsh mountain

WELSH Water's fresh tilt at Swalec has got off to a poor start. At the best of times the idea of Wales's monopoly water supplier taking over Wales's monopoly electricity supplier would get a cool reception. Matters were made worse for Welsh when it was forced by the Takeover Panel to rush out a statement. It now looks caught with its pants down, not yet ready to back up its merger ambitions with hard arguments. Swalec's management have not unreasonably asked to talk: the earliest Welsh will now see them is Friday - nine days after its announcement.

The City is less than thrilled by Welsh's previous diversifications - into hotels, rubbish collection and international consultancy. And it has already had to persuade Welsh to sell off a previously accumulated stake in Swalec.

Then there is finance. Swalec shareholders would almost certainly demand cash. A bid at pounds 10.20 would cost pounds 960m. A bid capable of winning would cost well over pounds 1bn. Even after stripping out Swalec's pounds 200m National Grid stake, Welsh Water would still have to find pounds 800m. That would mean a rights issue.

Welsh management have a mountain to climb if they are to pull off a bid. But I would not write them off. They are determined to capture Swalec, and were persuaded of the merits of a combined power and water utility long before Sir Des Pitcher created the first such beast in the North West.

Marshall's dilemma

INCHCAPE has done well to persuade Sir Colin Marshall to come to the rescue as chairman. But there is a fly in the ointment, according to at least one of Inchcape's big shareholders.

The arrival of Marshall is all very well. He is highly regarded as one of the team who turned round British Airways.

But though the chairman has changed, the chief executive remains the same. Investors believe that Charles Mackay has to take some responsibility for Inchcape's dismal performance in recent years. "He's not out of the woods yet," one told me last week.

Marshall, of course, could always edge him out. He's a tough businessman perfectly capable of swinging the axe when he thinks it necessary. But here's the potential problem.

Marshall and Mackay are old business friends, indeed Marshall in 1993 invited Mackay on to the BA board (a post he is now quitting). They also both sit on the board of HSBC, the banking group. All very awkward for Marshall if he has to be brutal.

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