Letter: Greenbury hits wrong target

From Mr R. L. M. Schlee

Sir: There is a widely held view that some highly paid executives, particularly in the privatised utilities, have been overpaid. This view attaches particularly strongly to the share options some of these executives have received.

The Government, in its haste to be seen to be taking action on this issue, has chosen to change retrospectively the rules so as to tax the gains arising on the exercise of share options as income rather than capital gains. The principal effect of this change is to make it impossible for option holders to use their capital gains tax exemption when exercising their share options.

Most of the highly paid "fat cats" will be unaffected by this change since they will already have sufficient capital gains arising on other transactions to use their exemption. Those who have no other capital gains will in any event lose only a small proportion of their total gain.

The impact will therefore fall on middle managers with modest expectations from the exercise of share options for whom this change will be extremely damaging.

It is difficult to conceive of a more inappropriate response to the Greenbury report. If the Government does not reconsider it will probably lose the support of a significant remaining loyal constituency of voters and will deserve to do so.

Yours faithfully,

R. L. M. Schlee

London, SW4