Hewitt announces measures to curb ‘fat cat’ payouts
The Trade and Industry Secretary Patricia Hewitt is to announce new measures to curb ‘fat cat’ pay offs for directors who leave failing companies.
The paper entitled Reward for Failure, to be published this afternoon, will weigh up alternative strategies for tying directors’ pay more closely to performance.
The Government is expected to ask shareholder groups, trade unions, and business lobby groups to comment on the proposals, which should become concrete later this year. They include measures to shorten directors’ notice periods to about six months, and give company boards the right to veto the pay packages of failing directors.
Ms Hewitt has said that she has no problems with big rewards for success but ministers want pay to be more closely linked to performance.
‘Britain has some of the best and most successful businesses in the world. But the good reputation of the majority is being tarnished by the bad practice of the minority,’ she stated.
The Minister continued: ‘But in response to continuing shareholder concern, this consultation explores whether further action is needed on the issue of directors’ contracts and severance.’
The Conservatives have welcomed shareholder interest in pay decisions which they say have become ‘offensive’ in some cases. Shadow Secretary of State for Trade and Industry, Tim Yeo said: ‘The right way forward is to give these new arrangements time to be fully tested.’
The paper comes in response to a growing tide of resentment over ‘fat cat’ pay over the last year. Last month, shareholders in drugs giant GlaxoSmithKline voted down a pay package which entitled chief executive Jean Pierre Garnier to a pay off of up to £22 million if he left the job early.
