CBI chief to call for shareholder action on executive pay

The Confederation of British Industry will wade into the dispute on "fat cat" pay today by backing plans to make companies more accountable for excessive remuneration packages for executives.

Digby Jones, the director general of the CBI, will tell a meeting of City representatives that he supports "shareholder activism".

The comments follow anger expressed by trade unions and shareholder groups yesterday at the payouts that board members of the steel maker Corus awarded themselves last year despite overseeing mass job lossesand a slump in the firm's share price.

But Mr Jones will attempt to head off plans floated by the Government at the weekend for a series of draconian guidelines, such as putting directors on six-month contracts, to be enshrined in law. The business world has become alarmed at the possibility that company law will be changed in an effort to stamp out excessive boardroom pay and so-called golden goodbyes for directors who have failed.

Mr Jones will tell the Institute of Directors' annual convention in London: "Business and shareholders must take the bit between their teeth and deal with this issue." He will caution against new legislation, arguing that it would impair the performance of British businesses by making it difficult for companies to recruit the most talented executives.

Shareholder bodies and unions have become increasingly frustrated by the pattern of generous payouts, which many companies have persisted in handing out to directors despite the difficult trading conditions they have experienced. Mr Jones will announce a working party to find ways to improve transparency and ensure pay is linked to performance. He will accuse trade unions of seizing on the issue to "peddle some good old-fashioned anti-capitalist, anti-business myths".

Michael Leahy, the chairman of the National Trade Union Steel Committee, expressed outrage that Corus had unveiled plans for a further 1,150 job losses on the same day that it held a vote at its annual general meeting on its directors' pay for 2002.

"UK steelworkers are paying the price for the board's mismanagement and ineptitude and yet their response is to featherbed themselves with an enhanced bonus scheme," Mr Leahy said.

The company said it planned to cut 822 jobs at its plants at Stocksbridge, near Sheffield, and Tipton in the West Midlands. Other cuts will be made at Llanwern, Gwent, in a cost-cutting programme the company hopes to implement in the next three years.

The future of a further 2,200 workers in Teesside remains in doubt. The company said its Teesside plant would not produce steel for Corus in the future but would try to sell its output on the international market. However, if the Tees-side operation fails to make money, it too will have to close.

Sir Brian Moffat, the Corus chairman, who will step down later this year, said: "We don't easily put people out of work. But we have got two or three years to try to help those people who have been identified." Since its formation in 1999 from the merger of British Steel and Hoogovens of the Netherlands, Corus has laid off 12,000 people, including 10,000 in the UK. There was anger among employees at the annual general meeting that British workers would again bear the brunt of the lay-offs at the Anglo-Dutch group. Sir Brian attempted to justify the decision, saying: "All the losses have been incurred in the UK. If it were not for the Dutch, those losses would be higher."

Corus will not be able to implement any of the new redundancies unless it secures extra financing. The cash-strapped group needs to raise £250m to cover severance pay-offs and investment in its remaining plants in Port Talbot, in south Wales, Scunthorpe in Lincolnshire and Rotherham in South Yorkshire.

The list of companies' boards likely to clash with shareholders us ever-expanding. Today Legal & General, the finance group Provident Financial, and Wyevale Garden Centres will face anger over directors' bonuses and the length of their contracts.