Outlook: No answers in executive pay debate

STEPHEN BYERS had the general secretary of the MSF union, Roger Lyons, positively purring with delight yesterday with his promise to "regulate fat cat pay". Never one to miss an opportunity to mix his metaphors, Mr Lyons went on to pronounce that the trade and industry secretary's action would "derail the executive gravy train in Britain".

But hasn't Mr Lyons missed something here? The extra helpings of spin which preceded Mr Byers' speech on executive pay to the Association of British Insurers has obviously left Mr Lyons a little dazed. The real message from the trade minister's peroration to the City is not that the Government is cracking down on boardroom pay, but rather that the sky is the limit provided executive remuneration is matched by performance.

It is a measure of how far New Labour has travelled in matters of corporate governance that even Michael Heseltine would have felt entirely comfortable delivering what Mr Byers had to say yesterday.

When a Labour cabinet minister says in all seriousness that it is no business of government to interfere in pay and that world class performance merits world class remuneration (by which he must mean the telephone number salaries available in the US), then the world really is moving on.

Mr Byers has offered a few sops for the saps like Roger Lyons. He is, for instance, consulting on the idea of requiring companies to put boardroom pay packages to an annual vote of shareholders. It took Tim Melville-Ross of the Institute of Directors to point out that this would probably be pointless, since the contracts of employment to which the pay relates would already be in place.

Few people would these days object to the idea of exceptional pay for exceptional performance. The difficulty arises in deciding what is exceptional performance and who is responsible for it. If the effect of removing the ceiling on boardroom pay is to drive up labour costs all round, then that will only make British industry less competitive, not more so. Executive pay is a tricky issue and Mr Byers plainly doesn't have the answers.