Labour plans 'fat cats' act

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The Independent Online
Labour has proposed a new corporate governance act to tackle the problem of excessive pay in the boardroom in preference to using regulators to interfere directly in utility pay.

Announcing plans for reform of utility regulation, Dr Jack Cunningham, the shadow trade and industry secretary, also revealed that he is to meet Sir Richard Greenbury, chairman and chief executive of Marks and Spencer, this week to propose new measures to prevent abuses "on salary hikes and share option packages which are completely unrelated to individual or corporate performance".

Sir Richard chairs the committee on top pay which is due to announce plans for greater disclosure of board-level earnings and a clearer link between executive pay and performance.

At the meeting, Dr Cunningham is expected to urge the toughest possible measures to ban boardroom pay increases unrelated to performance. Labour sees the Greenbury recommendations, if they come up to scratch, as a possible benchmark for good practice in any new legislation.

Tony Blair, the Labour leader, called for an end to the "unseemly racket" of price rises by the privatised utilities in angry clashes with the Prime Minister in the Commons.

Mr Blair staked out the privatised utilities as one of the main battlegrounds for the General Election campaign.Hesought to make his party the defender of the consumers' interests. He condemned the latest "pay-and-perks scandal" over the disclosure that three board members of the National Grid had cashed in £600,000 worth of options on shares not yet available to the public.

"These utilities have degenerated into an unseemly racket and the sooner you order a thorough overhaul of their system of regulation the better," Mr Blair said.

Mr Major, the Prime Minister, has promised legislation to back the recommendations of the Greenbury Committee, but this is expected to be much less comprehensive than the new act Labour is examining.

Some of the Greenbury recommendations are likely to be incorporated in the Stock Exchange rule book and a new version of the Cadbury rules on corporate governance.

The core of Labour's utility reform plan is to make shareholders in privatised utilities share "excess" profits with customers - including what Dr Cunningham called a consumer dividend.

In a speech to a London conference organised by the left-of-centre Institute of Public Policy Research and Unison, the public sector workers' trade union, Dr Cunningham said this would work automatically to curb the excess profits from which the salary and share option bonanzas of utility directors have been generated. But he made no mention of using the regulators to curb pay directly.

Qualified backing for change came from Clare Spottiswoode, the gas regulator, who told the conference that she was looking at possible reform of the price-setting formula and the introduction of profit sharing. She promised a consultative paper in the next month.

Opening the conference, Mr Blair said the present system for regulating gas, water, electricity and the other privatised utilities was not working and a new approach was required.

Dr Cunningham also said that Labour wanted to link automatic price cuts to high profits without destroying incentives towards efficiency.