pounds 3m award for BET chief stirs up argument over payouts
Friday 18 October 1996
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.
- 1 The truth about 'girl things': Three cheers for Heather Watson's honesty
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
- 4 Tennis fan suing Australian Open organisers for 'failing to shade spectators' during Murray match
- 5 Men behaving badly: Urinating while standing, 'manspreading' and the gendering of selfishness
Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Rob Lowe hits out at White House decision not to meet Israeli leader
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign
Winston Churchill: From accusations of anti-Semitism to the blunt refusal that led to the deaths of millions
British Muslim leaders outraged after Eric Pickles says followers of Islam should 'prove their identity'
UK terror fears: My jihadist son returned from Syria mentally scarred – now he is being ignored
Nigel Farage: NHS might have to be replaced by private health insurance
Billy Crystal: 'Stop shoving gay sex scenes in my face'
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...