CBI offers guidance on fat cat pay
The Confederation of British Industry (CBI) has issued guidance to stop firms giving huge payouts to failing bosses in response to the Department for Trade and Industry’s consultation on ‘fat cat’ payouts.
The employers’ federation has published a range of recommendations, including immediate disclosure of contractual terms and conditions, one-year rolling contracts, part-payment in shares and regular contractual reviews.
CBI Director-General Digby Jones commented: ‘The CBI is unequivocally against rewards for failure. There have been a small number of well-publicised cases where severance arrangements have given the wrong signals. It is vital that the business community works hard in every way at polishing its reputation with the wider community.’
He warned that the standing of business is at stake and that UK companies would not be able to attract international and homegrown talent if the issue was not tackled.
The CBI wants to see key contractual terms and severance details announced to shareholders immediately after the parties are committed to each other. It recommends that severance entitlements should be restricted to basic pay, earned bonus and pensions accrual only in line with pay in a move designed to minimise the cost of severance.
Mr Jones stated: ‘The flexibility to compete for and secure the best talent available is vital to the future success of UK business. So much of the good that companies can achieve in creating wealth and jobs for the UK is being obscured by a problem that business must solve, and be seen to solve, for itself if an unworkable solution imposed by others is to be avoided.’
The Government run consultation on Rewards for Failure, which ends on the 30th September, follows a number of high profile cases where top executives were given multi-million pound payouts despite their companies getting into difficulties.
Shareholders in the pharmaceutical giant, GlaxoSmithKline, voted against a £22 million severance package for its chief executive Jean-Pierre Garnier if he left his job, after the share price had slumped under his management.
HSBC, Tesco and Royal & Sun Alliance have all faced shareholder revolts over remuneration packages for their top executives. One of the largest uproars was caused by a £1 million pay out to the former chief executive of Marconi, John Mayo, who had presided over a major slump in the company’s share price and a highly expensive and unproductive buying spree in the telecoms market.
