But the fat cats who triggered the problems investigated by Sir Richard Green- bury and his committee have also got clean away with the cream, the canary and the caviar. Their option schemes will be taxed as income instead of capital gains in future, but either way the tax rate is 40 per cent and all they will actually lose is the ability to use the tax- free capital gains allowance of pounds 6,000 a year.
They will have to pay an extra pounds 2,400 a year in tax on future share options. But there is still nothing to stop them awarding themselves additional benefits to make up the difference. That is what Sir Richard was supposed to stop, and both he and the Chancellor have so far totally failed to address the issue.
Meanwhile, however, the Chancellor has closed the door on share options as a way of rewarding junior employees. Asda employees and others like them will be taxed as income on any future share options they are allowed. Hope- fully their employers will make up their earnings in other ways with increases in basic pay or bonuses - and make sure they are no worse off after tax even if it means a substantial increase in payroll costs. But in the current climate, that cannot be taken for granted.
Share-option schemes do have their shortcomings. They are only available to employees of public companies with quoted shares or plans for an early listing. Equally deserving employees of private companies or the mass of companies bought or set up in the UK by foreign investors miss out.
The spate of executive options that have created the current crisis have furthermore been handed out on terms that bear little or no relationship to profits and efficiency. Too many have either been handed out free or have priced to offer a one-way bet, regardless of whether performance improves.
If options are granted on terms that mean they have no initial value and only acquire value if the company meets specific performance targets - by growing profits at a faster than average rate or if the shares outperform comparable shares on the stock market - no-one should reasonably complain.
It has to be said, however, that the Treasury does not see it that way at all. As far as it is concerned, the merit of an option and its incentive value are less important than its taxability.
The official line is that options had become an pounds 80m drain on the Exchequer that could no longer be justified.
The Treasury does say, however, that it has no quarrel with save-as-you- earn schemes, which enable 1 million employees to buy shares out of income, often on artificially attractive terms. It also has no quarrel with profit- sharing schemes, which give tax advantages to employees willing to wait five years to cash their rewards.
For the present, anyway, it says it has nothing against profit-related pay, which was officially encouraged with tax concessions Lord Lawson introduced less than a decade ago, and now costs the Exchequer an estimated pounds 800m each year.
In practice, many employers have used PRP as a cheap alternative to increases in basic pay, meaning many employees have found that their total pay holds steady when their employer is doing well and falls - or fails to keep pace with the cost of living - when profits decline.Reuse content