Top pay rule 'crackers'

SIR Richard Greenbury, chairman of the Greenbury committee on top pay, has broken his silence in the wake of its controversial report and described one consequence of his recommendations as "crackers".

Sir Richard, the chairman of Marks and Spencer, mounted a strong defence of the committee and rejected accusations that some of its recommendations had been emasculated.

But he said one key recommendation had to be changed. The original formula for calculating the true value of pension benefits awarded to top directors would have produced perverse results, he said.

"It's crackers," he remarked. "It wouldn't have made sense to people." Sir Richard revealed that the proposed formula had been tested on real examples, including directors of M&S. Last year, the pension entitlements of three directors would apparently have shrunk.

The Institute and Faculty of Actuaries has now been asked to look at adjustments to the formula to smooth out some of the more extreme figures.

Two Greenbury committee members, Geoff Lindey, chairman of the National Association of Pension Funds, and Tim Melville-Ross, head of the Institute of Directors, have expressed alarm about this change and an apparent modification to the rules on long-term bonus schemes.

Sir Richard denied this would water down his original recommendations. "We're not watering anything down," he said. "What we want is a system that is transparent."

He also queried Mr Lindey's claim 10 days ago that "powerful voices" were trying to block Greenbury. "If there are, I don't know who they are," Sir Richard said.

He played down the significance of changes to the rules on bonus schemes. The principle of shareholder approval would now be in place, he said. "At the end of the day, there's always going to be some smart-arse getting round whatever you do."

Explaining that he had been "out of action for eight weeks" because of a hip operation, Sir Richard said: "For six months I got slagged off because I was a fat cat, with everyone saying it would be a weak shilly-shallying report. Now I read that the report is so tough, so draconian, that British business is looking for ways to get around it."

He said people should be patient: "Judge it in 1997. Give it a year or two."

Any final decision on the pension formula is months away. Raymond Paul, secretary to the pensions board of the IFA, said it would issue its suggestions to interested parties by Christmas.