Icap chiefs could net £4.2m under new scheme

The City's biggest derivatives and money broking group Icap is to end its share option programme for senior directors this year and hand over a three per cent slice of its profits instead in an attempt to improve corporate governance and align executives' and shareholders' interests.

Michael Spencer, chief executive of Icap, and three other directors will share a pot of £4.2m provided the company makes more than £140m in profit this year, a 13 per cent increase on 2002's profit of £123.7m. Last year Mr Spencer - who founded Icap 17 years ago - took home £3.7m and also collected a similar sum in dividends from a separate private company through which he controls a large chunk of Icap's shares.

In total 28 executives earned in excess of £1m, with seven taking home £2m or more and this makes Icap one of the most generous employers in the City.

Icap, which has benefited from the boom in derivatives trading since the stock market slumped, has seen its share price rise 30 per cent in the past 12 months.

Directors David Gelber, Stephen McDermott, and Jim Pettigrew, who will share the £4.2m with Mr Spencer, must invest half of the pay-out in Icap shares in a scheme which Icap said was a "clear and transparent" scheme of rewarding directors if they do a good job. To provide the icentive for them to stay with Icap, it will match their investments after three years.

The National Association of Pension Funds said it welcomed Icap's broad structure, saying: "Performance-related bonuses are good corporate practice." But the corporate governance lobby has been suspicious of options programmes ever since companies such as Marconi tried to lower the trigger price of options in order to allow directors to benefit despite a slump in their company's share price.

Some 119m options were awarded by FTSE 100 companies to their boards last year at an average price that was a third lower than the previous year and its lowest since 1996.