Lines drawn for fight on fat cat pay

THE FIGHT over the Greenbury Committee's recommendation on pension disclosure is expected to erupt again this week as combatants line up behind two clear choices.

The Institute & Faculty of Actuaries plans to unveil a discussion document in an attempt to defuse the tension between directors of listed companies and institutional fund managers. Altogether it will list five possible options, but only two are felt to be serious contenders.

Despite actuaries' hopes that submissions over the next few months will be close to unanimous, insiders predict a potentially acrimonious split between the two groups.

The decision by the Stock Exchange and the Department of Trade and Industry to throw out the actuaries' original recommendation sparked a bitter dispute in November, with supporters of the actuaries charging that the Greenbury Committee on directors' pay and perks was being nobbled.

Full disclosure of pension benefits was a vital point in Greenbury's proposals: large pay rises in the last months of a boss's career can lead to dramatically increased pension entitlements for years to come.

Information obtained by the Independent on Sunday indicates that the actuaries will put forward five different methods of calculating the cost of executive pension benefits. The two front runners are:

q The transfer value, originally proposed by the actuaries and supported by many institutions, which would calculate the cost of the director's increased pension, assuming he left the job at the end of that year. Listed companies oppose it because the dramatic increases, several times larger than the underlying pay hikes, would leave them open to damaging headlines.

q The smoothed value, favoured by companies, which would show the average value of a director's pension increase assuming he stayed with the company until retirement. But, because it includes estimates about the director's future pay increases, it can be wildly inaccurate.

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