pounds 3m award for BET chief stirs up argument over payouts

Employment lawyers said yesterday that companies were unlikely to give way easily to pressure for higher compensation for executives in the wake of the pounds 3m awarded to John Clark, former chief executive of BET.

They believe shareholder campaigns to avoid payment for failure have become so vocal that boards are likely to continue to try to minimise claims and are altering employment contracts to ensure they have the power to do that.

Ian Hunter, of Bird & Bird, said the decision "probably won't mean companies will cave in."

Jane Mann of Fox Williams said companies were increasingly demanding termination clauses that allowed them to act against executives who underperformed, while executives usually fought very hard to keep the clauses out of their contracts. Such clauses would give critics inside the company or shareholders levers to use against someone they did not like.

In a typical compensation dispute, performance while holding the job is not an issue if a case comes to court, where the argument centres on contract law. Indeed, an employment contract is only usually voided by something as serious as an assault or fraud.

Mr Clark won almost all he was entitled to under his contract. It was not a result of winning a dispute about performance, because Rentokil Initial, which took over BET and fired him, never claimed he underperformed.

Instead, the argument was about the degree to which the compensation under his contract should be trimmed back by the prospect that he could find another high-earning job. The better his chances of becoming chief executive somewhere else, the less compensation the court would award him.

As it happened, the judge decided that at the age of 55 he was unlikely to get another job as good. Ms Mann, who is fighting a number of cases for chief executives, said the judge had followed the principles of employment law to the letter.

She agreed that it would be difficult for Mr Clark to find another job at the same level of seniority, and thought it would be equally difficult to take a less senior job reporting to someone else, who might feel threatened by his presence.

Another lawyer suggested that if Mr Clark did find another senior job it would considerably strengthen Rentokil Initial's hand in the appeal it has said it plans.

The pounds 3m award has confirmed the view of many lawyers that the Greenbury Committee on top pay was quite wrong in its recommendations about compensation.

Sir Richard Greenbury's committee said boards should take an executive's performance into account when setting compensation, and pay rather less if the job had been done poorly.

The court case, by underlining the point that legal arguments about compensation do not usually revolve around performance at all, showed that directors are unlikely to have the power to behave as Greenbury suggested.

Ms Mann said "Greenbury ignored the fact that where a contract is breached an individual has a legal right to compensation. It is not a discretionary matter.'' No matter how badly an executive performs, a breach of contract is a breach of contract.

Very few executive compensation cases come to court and most are argued out between lawyers.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent