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Competitiveness White Paper: Boardroom Salaries: Top executives' huge pay rises condemned

THE WHITE PAPER attacks greed in the boardroom, and says rewards must go down as well as up. But it stops short of recommending direct government action to slow the pay spiral.

It says: 'Some recent pay awards to some senior executives of UK companies have been of concern to many,' adding that shareholders have received inadequate information to judge whether directors have earned their money.

'The Government believes that pay must be shown to respond to market conditions in both directions,' the paper says, in a reference to the directors whose pay goes on rising as their companies' performance falls.

The paper says the Cadbury committee, which drew up voluntary rules of behaviour, encouraged companies to provide full disclosure of earnings and is continuing to monitor the position.

The White Paper sidesteps pressure to legislate to make City takeover bids harder, an idea espoused by the Labour Party in a recent policy paper. But it backs a review by the Accounting Standards Board of accounting practices which encourage UK companies to grow by takeover rather than organically.

The paper examines Britain's high level of dividend payments compared with other countries, which it labels an area of concern. It says the issue is not the level but the inflexibility of payments: they fail to respond to variations in profits. The issue, the paper says, is whether capital is best kept inside companies, or paid to shareholders and recycled to industry through new share issues.

The paper identifies the reliance of British companies on overdrafts as marking them out from foreign competitors. This is another area of concern, but there is evidence that banks and businesses are now placing greater emphasis on long term finance.

Although it lists the complaints of small businesses about the behaviour of banks, the White Paper says successive reviews have confirmed the banks' commitment to small businesses.

In an attempt to spread the practices of the best British companies to the rest, the Government has also launched a joint DTI and CBI survey of the top 100 British companies to identify the best and to keep British business ahead of its competitors. The paper says good management is critical to success and there are many world beating companies in the UK. But more are needed to bring the UK's average performance up to the level of its competitors. To ensure fair and open markets for business, the White Paper promises to work for fairer European Union and world trade rules, and is funding 70 export counsellors to help British firms. It also promises a range of further measures to attract foreign investors to the UK.