Letter: When resignation merits compensation

Sir: The call from Peter Needham in your management column ('Rolling stones gather moss', 24 August) for more long-term commitment from directors is laudable. However, his solution that fixed contracts should replace the rolling variety ignores the realities of the process which gives compensation for loss of office.

Genuine resignations do not produce a golden handshake from any of the rolling service contracts which I have seen. Most 'resignations' are, however, a case of jumping before being pushed; negotiations take place over the unexpired period of the contract and a settlement is agreed.

Although there is understandable pressure from several quarters for contracts to be reduced in length, the reason why many companies will continue to concede them to an individual whom they wish to poach is that the individuals argue hard for such protection because they would lose the security they enjoy in their current job.

The most hazardous period of any employment is the first two years. If an appointment turns out to be a failure, severance would result, but a fixed five-year contract is likely to produce just as large a compensation payment as a rolling agreement.

Nest-feathering and over-protection may need to be curtailed but it is more likely to be through more rigorous examination of contract terms than Mr Needham's solution.

Yours sincerely,

KEITH McNEISH

London, SE1