Hampel questions boardroom pay rules

The Hampel Committee on corporate governance is examining whether rules on boardroom pay and long-term incentive plans need to be tightened up in the wake of renewed controversy over executive remuneration.

The committee, chaired by Sir Ronnie Hampel, the chairman of ICI, yesterday wrote to organisations representing business, shareholder and consumer interests, asking whether the guidelines concerning performance-related bonus schemes needed "refinement".

The letter also canvasses opinion on whether shareholders should have to vote to approve directors' pay packages at annual meetings and whether the Greenbury Committee's recommendation that directors' contracts be limited to one year strikes the correct balance.

This is the first time the Hampel committee has spelt out the areas it is examining since it was set up last November to review the workings of the Cadbury Code on corporate governance and recommend any changes and additions that might be necessary.

Other areas the committee has decided to concentrate on are the role of executive and non-executive directors and ways in which the relationships between owners and managers can be strengthened.

In particular, the committee asks for views on whether unitary boards consisting of roughly equal numbers of executive and non-executive directors is the most appropriate structure for UK quoted companies.

The letter also asks whether there needs to be a division of responsibility between chairman and chief executive - one of the key recommendations of Cadbury - or whether it is enough to prescribe a sufficient degree of independence on company boards through non-executive directors.

Another area being studied is the role of shareholders, particularly institutional investors, and whether they should exercise their ownership rights more actively by, for instance, voting on all resolutions at AGMs and concerning themselves with broader issues such as social, environmental and ethical matters.

The letter, from the committee secretary, John Healey, asks for responses by 31 December. The committee has been asked to report by the end of 1997, although it aims to issue a draft report around the middle of next year.

Christopher Haskins, the chairman of Northern Foods and a member of the Hampel committee, will address the Confederation of British Industry's annual conference in Harrogate next month on corporate governance. The CBI is due to publish a report in the next fortnight strongly backing the concept of unitary boards and rejecting the two-tier boards favoured on the Continent.

The committee is also asking interested parties such as the Association of British Insurers, whether, in reviewing the existing Cadbury code and deciding what needs deleting or adding, it should differentiate between companies by size and type of business.