CBI unveils curbs on payments for failure

Proposals to stamp out payments for failure in the boardroom will be unveiled today by the CBI in its long-awaited report on executive remuneration.

The employers' organisation is expected to call for one-year contracts, the stopping of severance pay if a sacked executive gets another job. The CBI will also tell its members that making shares a larger part of directors' remuneration should be considered best practice.

The move comes as the CBI confirmed Digby Jones, its director general, would stay on in his job for another two years.

Mr Jones said he had accepted the offer, which will take his £295,000-a-year post up to the end of 2006, in order to improve the image of British business. The private sector has had a bumpy few years, hit by accounting scandals in the US, the crisis on company pensions and the row about pay-offs for failure.

The CBI's boardroom issues group, led by Sir Nigel Rudd, chairman of glassmaker Pilkington, is keen to pre-empt any attempts by the Government to cut down on huge pay-offs for sacked directors through legislation by persuading businesses to get their own house in order.

The CBI is particularly keen on making it common practice for companies to introduce phased pay-offs which would be terminated altogether if an executive got another job.

Sir Nigel has also said he backs a move to make shares a larger part of pay packages. This could either be by paying bonuses in shares which could not be touched for a number of years, or by making executives take their pay-offs in shares.

Such a move might satisfy the corporate governance lobby, because if a director was widely thought to have underperformed and lost the confidence of investors and his or her own board, that would be likely to be reflected in a fall in the value of its shares and therefore his severance package.