MPs seek curbs on executive bonuses at British Energy

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The Independent Online

Ministers should curb bonus payments to British Energy executives which result from the financial support given by taxpayers to the ailing nuclear electricity generator, an influential committee of MPs urged yesterday.

Ministers should curb bonus payments to British Energy executives which result from the financial support given by taxpayers to the ailing nuclear electricity generator, an influential committee of MPs urged yesterday.

The Commons Public Accounts Committee said that the Department of Trade and Industry should devise a way of adjusting the pay of the company's directors to reflect the fact that its finances had benefited from a £410m government credit facility and a deal whereby the taxpayer shoulders its £5.6bn of historic nuclear liabilities.

Adrian Montague, BE's chairman, received a £300,000 bonus in 2002-03 in addition to a salary of £100,000 and stands to pick up a bonus of £100,000 this year on top of basic pay of £300,000 if the complex financial restructuring of the company is successfully completed. Meanwhile, BE's chief executive Mike Alexander earned £590,000 last year, of which £190,000 was in the form of a performance bonus.

However, the PAC said that salary and bonus payments made possible by taxpayers' support for the restructuring should be excluded from the pay of BE's top executives.

The committee said that one way of achieving this would be through a memorandum of understanding relating to directors' contracts overseen by a government director appointed to the BE board's remuneration committee.

A DTI spokesman said it would respond in due course to the report but pointed out that the credit facility had been repaid in full with interest so that there was no question of the taxpayer directly funding bonuses for BE directors.

A BE spokesman said that it too was considering the PAC's recommendations. But sources close to the company stressed that the bonuses paid to Mr Alexander and his fellow executive directors were based purely on its financial and operational performance. Mr Montague's bonus was directly linked to the restructuring being completed. "You have to judge whether or not that is a good return on money," the spokesman said.

The PAC report goes on to criticise DTI ministers for distancing themselves too much from BE after its privatisation in 1996 and failing to monitor its performance properly.

The DTI is also taken to task for introducing a new set of electricity trading rules which had a damaging impact on BE without taking into account what the taxpayer's potential exposure could be if the company subsequently collapsed.

The DTI spokesman responded that it acted appropriately and that the PAC report itself laid part of the blame for BE's collapse on the failure of its management to respond to changes in the electricity market.

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