View from City Road: Boardroom pay rethink needed

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THERE is a shameless unreality about the pay rises still being awarded in some boardrooms. Yesterday the heat was on Sir Malcolm Field, who has been given a 57 per cent pay rise to pounds 323,000. The WH Smith managing director's pounds 117,000 increase was made up of (1) a pounds 9,000 basic pay rise, (2) a pounds 25,000 'discretionary bonus' for his performance in 1990-91 and (3) an pounds 83,000 bonus - by our calculations - for the retail group's earnings performance in 1991-92.

The pounds 9,000 is reasonable. Sir Malcolm and his fellow executive directors took a responsible 4.5 per cent rise while the 29,000 staff got an average of 5 per cent.

The pounds 25,000 bonus is less easily explained. It was paid for a year when Smith's earnings per share actually shrank and it was forced into embarrassing and costly U-turns on satellite television and travel.

The pounds 83,000 top-up is almost as puzzling. Earnings per share grew by 12 per cent, but the improvement was mostly thanks to a lower tax charge and a large exceptional hit the previous year.

Smith's operating performance was reasonable but hardly outstanding - trading profits fell from pounds 117m to pounds 116m. The Do It All chain of do-it-yourself stores remained heavily loss-making. (Coincidentally, Smith's 50-50 partner in Do It All is Boots, whose splurge of management bonuses earlier this year was even more blatant.)

Remuneration committees seem to be uninterested in controlling directors' pay, sometimes appearing to hand out massive sums on little more than a whim. The Cadbury committee's draft report on corporate governance falls short of recommending that boardroom pay be put to a shareholder vote. Maybe it is time for a rethink.

(Photograph omitted)