The fat cats are back, purring excuses as they lap up rich rewards for their work

The fat cats have returned. A gallery of top executives at British (or British-based) companies has turned out to be basking in the warm glow of huge gifts of shares, cash payouts or salary rises which leave inflation, currently running at about 3 per cent, far behind.

The fat cats have returned. A gallery of top executives at British (or British-based) companies has turned out to be basking in the warm glow of huge gifts of shares, cash payouts or salary rises which leave inflation, currently running at about 3 per cent, far behind.

Nobody is certain why. But they do agree that although it might look like the return of "Cedric" - the "fat cat" symbolised by a pig in a trough, inspired by the 1995 row over the pay of Cedric Brown, then head of British Gas - that this time the cause is quite different. Then, it was caused by privatisation. Now, it is caused by something quite different - globalisation. Or possibly, suggests one analyst, obfuscation.

"These executives are trying to pull the wool over people's eyes," claimed Alan MacDougall, managing director of PIRC, an independent group which advises on corporate governance. "So they're creating increasingly complex schemes to get themselves paid more and more."

Yet if you expected that dot.com internet companies, with their potentially global reach, would be at the forefront of that charge, think again. They tend to be at the bottom of the league in terms of pay.

On Thursday, at the annual general meeting in London of the giant mobile phone company Vodafone AirTouch, Chris Gent, chief executive, will defend a £5m cash bonus he has received by insisting it was not a reward for the takeover of the German Mannesmann company earlier this year.

That acquisition, at £100bn the biggest in corporate history, will lead to top Vodafone executives being rewarded with a total of £20m in shares and cash bonuses. Half of that, as cash and shares, would go to Mr Gent under the original proposals.

When the news emerged in the company's annual report earlier this month, the pension fund companies in the City owning big blocks of Vodafone shares were uneasy. "We want to give Vodafone a slap on the wrist," one fund manager said. Another noted that Mr Gent would qualify for the payment if the company achieved just 3 per cent growth in earnings - far below typical stock market growth. "The targets are too low," he concluded.

With the blessing of the National Association of Pension Funds (NAPF) - whose members control about £450bn of funds, or a quarter of the value of the stock market - they proposed to deliver that slap by abstaining from voting the pay deal through. Hardly stinging, and it won't stop the motion being approved.

But Vodafone sources close to Mr Gent say he will offer instead to take the equivalent post-tax amount and buy company shares with it. This follows private pressure from institutional shareholders, who felt that any bonus he received should be tied to performance.

A nice gesture? In one sense it is - though if the shares go up as they have historically he will have done better thanif he had just received the cash. "Chris is the victim here," insisted a colleague at Vodafone. As victim compensation schemes go, it could be worse.

Concern has also been raised about the pay package proposed for Jean-Pierre Garnier, who is to join as chief executive of the newly merged pharmaceuticals company GlaxoSmithKline. The plans propose giving him options on 860,000 shares, which could be bought after three years. At current prices they would be worth £15.3m, compared to a basic annual salary of £771,605.

"These UK companies see themselves as multinationals, which they are, but instead of taking an international view of pay, they are taking a US view, which is not the same thing," said one fund manager of GlaxoSmithKline's proposal. American companies have been wildly generous to their chief executives, while German ones are more parsimonious: "If you averaged out US pay and German pay, you would probably come out close to current UK pay levels for chief execs," said the fund manager.

The retail chain Marks & Spencer, the transport company Christian Salvesen, British Airways and Barclays Bank have all come in for similar criticism: that they are rewarding their executives out of proportion to the value they have added to the company - either through over-large salaries or share options or both.

The fat-cat phenomenon came to public attention in the early Nineties, with anger boiling over at British Gas's annual meeting in May 1995, when a 30-stone pig called Cedric was used as a symbol against Cedric Brown, the chief executive who had received a 74 per cent pay rise to £475,000 per annum, and Richard Giordano, the chairman, who was getting £450,000 as a part-time non-executive.

The argument was that Mr Brown was effectively being rewarded for being lucky - in the right place at the right time when the company he worked for was privatised. That stormy meeting was seen as a turning point in executive pay, and the phrase "fat cats" came to be used so effectively by the then shadow Chancellor, Gordon Brown, against John Major's government as yet another example of how rotten things had become.

Sir Richard Greenbury, who was chairman of Marks & Spencer, was chosen to head a committee to suggest better means of corporate governance - such as more transparency on how executives are paid; the removal of "rolling contracts" which are automatically renewed but oblige big payouts by the company if it fires an executive; and the reconfiguration of remuneration committees - which decide how much executives should be paid - to exclude the executives themselves.

Most companies implemented those suggestions (though British Airways and Christian Salvesen seem to have overlooked them). Yet now, five years later, it all seems to be happening again.

"Following a spate of mergers and acquisitions in the US, a lot of companies are tryingto impose US standards of pay," said Mr MacDougall of PIRC. "And a lot of them are trying to get their new pay structures in place before the Government's response to its own report on corporate governance - filed in September but delayed, we hear, by Downing Street. So they're making the pay systems more complex essentially to pull the wool over people's eyes."

Do the arguments that they have to pay global fees to keep executives hold up? Mr MacDougall replied: "I spoke to the company secretary at one of the four big companies, Vodafone, BT, Barclays, and GlaxoSmithKline. And I said, if this pay package isn't approved, do you think X will up sticks and head abroad? And they told me no, of course not, because they were committed to the company strategy. For top-level executives, the competition argument is very weak - though it might apply further down the management line."

And what about the argument that pay needs to be made global? "It's interesting that when they say 'global', they mean the US," said Mr MacDougall. "Not France or Germany or Spain, where pay levels are lower than here."

Intriguingly, research published last week found that internet companies do not pay themselves over the odds; if anything, they tend to be more restrained in their pay, though often with share option schemes extending throughout the company, according to a survey by Arthur Andersen.

But for all that, this may be just a brief hurrah for the reborn fat cats. The Accounting Standards Board is expected to recommend that the future cost of share options should be charged to the company at once; in the case of Vodafone and GlaxoSmithKline, for example, their executives' future rewards would hit profitability immediately.

Mr MacDougall said: "What with that and the report now in Downing Street, there are straws in the wind. And maybe these executives are thinking that it's time to get their pay up quick, before there's some sort of ceiling imposed - either in absolute terms, or the relative difference betweenthe highest-paid and the lowest-paid in the company, which is often used in the United States."

Certainly the latter differential has grown. A survey of 20 leisure companies, called "Pay for Performance", found that the average employee is paid 20 times less than the chief executive - with the gap widening to 50 times at Bass and 66 times at Granada. When you compare the lowest-paid, who will often be on the minimum wage, it is even greater.

Janet Salmon, who wrote the report, said: "The disparity lowers productivity and morale, and increases staff turnover. It is difficult to stress teamwork when the reward gap is so striking."

But few executives are looking at that gap. All the evidence suggest they are looking at the gap between themselves and their US contemporaries. "It's globalisation," said Mr Rogers at NAPF. "It's not really fat cats. This is quite a different animal." But still, it seems, well-padded.