Granada's Allen to lose controversial two-year contract

Charles Allen will almost certainly be prevented from hanging on to his controversial two-year contract if Granada and Carlton are given the go-ahead for their merger, it emerged yesterday.

Michael Green, chairman of Carlton and chairman elect of the proposed single ITV company, will today tell shareholders that all board directors at the merged group will be on standard one-year contracts as they are now at Carlton.

Mr Green's stand could exacerbate tension between him and Granada's Mr Allen, who has been criticised by institutional investors for hanging on to a contract that could see him walk away from the group with a £2m pay-off under his current terms.

Mr Green himself could also face criticism from shareholders after the heavyweight National Association of Pension Funds urged its members not to support its remuneration report. The NAPF has objected on the grounds that it does not give sufficient details of the criteria used to award performance-related pay to its directors, including its chairman Michael Green.

Meanwhile Reuters yesterday became the latest target for corporate governance watchdogs. Manifest, the shareholder activist group, signalled its displeasure with Reuters' decision to pay Tom Glocer, the chief executive, £1.7m last year despite the fact he presided over the company's first ever reported loss and a collapse in its shares.

Alan Brett, a research analyst at Manifest said: "Shareholders may be concerned that directors are getting rewarded well while the share price has been hammered. Shareholders should consider very carefully how they use their vote on the remuneration committee report."

A spokesperson for Reuters defended Mr Glocer's pay package saying: "Tom received 60 per cent of his entitlement because he achieved 60 per cent of his targets. He has also aligned himself closely with Reuters' shareholders, having bought 200,000 shares in the last month."

The giant news organisation can nonetheless expect shareholders to be in a febrile mood at its annual meeting on 17 April after the company's shares have collapsed from £7.47 in 2002 to 118p this year.

It is the latest company to find it has fallen foul of corporate governance watchdogs who have stepped up their campaign against hefty pay packages for executives.

The NAPF said it was unlikely to be supportive of the £20m new options scheme Reed Elsevier is planning to award directors. The Association of British Insurers has already condemned the move, issuing "red top" voting advice to its members saying they should consider vetoing the package at the publishing company's AGM on 8 April.