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Ministers to act on boardroom excess

Charles Begley
Sunday 27 April 2003 00:00 BST
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The Government is to intervene in the scandal of boardroom pay, which has sparked a wave of shareholder revolt and public fury at the huge dividends handed out to "fat cat" bosses of ailing companies.

A series of multi-million pound pay-outs to executives presiding over record falls in share value, redundancies and drastic cuts in profits has attracted the wrath of Patricia Hewitt, the Secretary of State for Trade and Industry, who is said to be finalising a paper on executive excess due to published within a fortnight.

Ms Hewitt will set out measures in her paper, Reward for Failure, to prevent a repeat of recent investor acrimony following a succession of mutinies by pension-fund managers angry at company plans for directors' pay and bonuses.

Her plans include linking pay-offs for directors to performance; cutting the length of contracts to six months to reduce the amount paid out if they leave early; paying out compensation in stages; and inserting performance quotas in contracts.

Last week Ms Hewitt described the protests against director payments as "entirely justified fury".

"In this year's company AGMs we are seeing a new wave of shareholder fury, an entirely justified fury about excessive rewards to directors who have been responsible for corporate failure," she said.

Among the bosses who have attracted criticism are the former chief executive of cable firm Telewest, Adam Singer, who was given a golden goodbye of £1.8m despite taking the firm to the brink of bankruptcy. Under him, shares fell from £5.63 to 2.1p, and in 18 months 1,500 staff lost their jobs.

Sir Philip Watts has presided over a 27 per cent slump in the share price of Shell in the past year and the company plans to lay off 4,000 staff, but his reward was a 55 per cent pay rise to £1.8m.

Ms Hewitt was unavailable for comment last night but an unnamed DTI source told The Observer: "We are finalising it now, and expect it to be published shortly."

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