New threat on executive pay

BY DONALD MACINTYRE, PETER RODGERS

and JOHN EISENHAMMER

The Government will consider legislation on executive earnings even though the Greenbury committee is expected not to recommend statutory curbs.

The committee set up by John Major under the chairmanship of Sir Richard Greenbury, chairman of Marks and Spencer, after a spate of highly publicised pay and share option deals for top executives in privatised utilities, will tomorrow consider a draft which stops short of proposing legislative curbs.

But Mr Major is coming under pressure from within the Government's own ranks to promise statutory measures, even if it means going further than the Greenbury recommendations, expected early next month.

One option still under consideration in the Treasury is changes to the system of tax approval for option schemes - for example, insisting that they are geared to company performance and are relieved from tax only in companies that offer the rest of their employees share ownership schemes.

But some ministers, led by Michael Heseltine, the President of the Board of Trade, will argue that the Government should not go further than Greenbury.

The meeting tomorrow is expected to come down against recommending that remuneration committees on company boards publish an annual report on which shareholders can vote.

This is one of the remaining issues to be sorted out among members, but sources said it was unlikely to be approved by a majority.

The committee is now certain to recommend extending approval by shareholders to all forms of long-term incentive schemes, whether they involve bonuses or options.

Ian Byatt, head of Ofwat, the water regulator, added to pressure for shareholder action against excessive pay awards to utility directors. He said it was something shareholders should look at.

Meanwhile, fund managers appeared resigned to the prospect of legislation to make voting compulsory on all resolutions, not just pay, at AGMs. "Everyone has got so hyped up about the pay issue, we are all being forced down the mandatory voting road," said the investment head of one UK fund.

But the Association of British Insurers and the National Association of Pension Funds made clear their concern. "Compulsory voting is not the same as responsible voting," said Geoff Lindey, chairman of the investment committee of the NAPF.

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