CBI turns the spotlight on to company pensions

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The CBI is to carry out a wide-ranging review of pensions following concern over the damage done to the reputation of business by the widespread closure of final salary schemes.

Digby Jones, director general of Britain's main business organisation, said the CBI's standing committee on pensions, led by Richard Greenhalgh, head of Unilever in the UK, may report its findings ahead of next year's Budget.

The CBI shifted its focus to pensions as it announced a list of improvements it is urging companies to adopt to improve their corporate governance record, including capping directors' contracts at one year and paying a bigger proportion of salary in shares.

Boards should also announce a new director's pay as soon as the appointment is announced to the Stock Exchange, rather than publishing the details up to a year later in its annual report, the CBI said.

Mr Jones said the next area where companies needed to improve their image was on pensions. He added that the Government also "had to do more" to address the current chronic under-funding of pensions by individuals.

The CBI's long-awaited proposals to stamp out controversial payments for failure, on which it has consulted the entire FTSE 100, is a move to head-off possible legislation by the Government.

Mr Jones also called on institutional investors to take up the baton by disclosing the pay and bonuses awarded to fund managers.

He said a large number of CBI members felt they had heeded the new Higgs code on corporate governance by explaining to fund managers why they had taken particular decisions.

Yet those fund managers which agreed in private "had not got their heads above the parapet to support companies" in public, Mr Jones said.

The CBI's proposals to clamp down on payments for failure were welcomed by the National Association of Pension Funds and the Association of British Insurers, whose members account for a large chunk of the stock market.

But they did not take so kindly to Mr Jones's suggested changes to their own industry. Peter Montagnon, head of investment at the ABI, said: "When shareholders have agreed to something in private that represents a compromise, it does not mean they are enthusiastic about it".

Mr Montagnon added that it was "perplexing" that the CBI had called for more disclosure among fund managers of their own pay regimes. "It is the law that all directors of public companies disclose their remuneration and that applies to fund management companies that are listed. It is not the law for fund managers or anybody else that are not listed to do so," Mr Montagnon added.