NAPF turns up the heat on top pay at Balfour Beatty and Hilton

Shareholders are being advised to withhold support for directors' pay packages at Balfour Beatty, Hilton Group and International Power.

The National Association of Pension Funds has advised its members, who run £700m of investments, to abstain on the recommendation for two remuneration packages at Balfour Beatty, a key government and railway contractor. It has a contract to renew and maintain two thirds of the London Underground, and has numerous other public-private partnership deals.

The NAPF has taken the action because of two-year service contracts for two executive directors at the company. The long contracts are not seen as best practice in corporate governance. The annual general meeting takes place this Thursday.

At Hilton, the hotels group, the NAPF has withheld support for pay packagse due to the extended length of some executives' service contracts. "While the NAPF accepts that the company is conscious of investor sentiments in relation to executive director service contracts, the proposed remedies do not sufficiently address the issue," it says in a report to members. "The chief executive [David Michels] should be expected to show leadership in resolving this issue, and as his normal retirement age is 65 and he is 56 years old, the NAPF does not consider that his age mitigates the issue of his notice period."

It also recommends abstention on the re-election of finance director Brian Wallace, also due to a contract that is "essentially" the same as a two-year rolling contract. The AGM is on Friday.

At energy generator International Power, the issue is the extension of directors' service contracts to two years if the company is taken over. The NAPF also criticises the fact that no explanation is given for these terms, nor for the increase in directors' bonuses. The AGM is on 19 May.

The NAPF has become increasingly active on top pay and corporate governance. It opposes long service contracts because if a company fails or is taken over, the directors will be given a large lump sum, seen as a reward for failure. The Government is preparing a consultation document on executive pay. It is understood it will propose to ban extended service contracts and end the practice of "golden parachutes", when directors are given payoffs after company failure. This follows outrage over increases in pay despite uncertain economic times.

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