Mandelson warns bosses on 'fat cat' rises

PETER MANDELSON, the Secretary of State for Trade and Industry, will today demand that company executives show restraint over pay after criticism of the salaries of "fat cat" bosses.

Although the Government has dropped threats to legislate to give shareholders the power to veto bosses' wage rises, ministers are prepared to "name and shame" executives who receive unjustified pay awards.

Mr Mandelson has summoned Britain's pension fund managers to talks today at which he will urge them to use their influence to ensure company chiefs set an example to ordinary workers.

"The Government believes success should be rewarded but that institutional shareholders have a crucial role to play in ensuring that directors earn their pay," one Whitehall source said last night. "The meeting will establish what progress has been made in the past six months on this issue."

Mr Mandelson will urge investors to: ensure a link between pay and performance; stop issuing more share options to compensate for the falling stock market; pressurise companies to let shareholders vote on executives' pay and elect chairmen of remuneration committees.

Mr Mandelson will be talking today with the Institute of Fund Managers, the National Association of Pension Funds and the Association of British Insurers. He will also urge them to be more ready to invest in hi-tech firms, to help to foster Britain's information technology revolution.

He will set out plans to create a "knowledge-based society" in a White Paper later this month aimed at boosting the competitiveness of British industry. It may include extra tax incentives for new ventures.

Recent surveys have suggested that the pay of executives in Britain's leading companies soared by 45 per cent in the past year, with the average boss now earning pounds 1m. But managers' organisations pointed to figures showing British directors were paid about 30 per cent less than their counterparts in Germany, Austria, Spain and Switzerland.