UK - The Institute of Directors has hit back at the Local Authority Pension Fund Forum's (LAPFF) efforts to enforce one-year contracts for executives.
The LAPFF is threatening to “name and shame” 120 companies from the FTSE350 which still issue two-to-three-year service contracts to their executives against best practice guidelines.
But IoD professional standards research and development executive Daniel Summerfield said the LAPFF should accept that companies must have flexibility over the length of such contracts.
Summerfield said: “If a company wants to encourage 'long-term' outlooks from new executives, they still need to offer initial three-year contacts.
“When you’re recruiting in a competitive market, there needs to be some flexibility in the service contacts. Prescription would be counter productive.”
However he stressed that the IoD stands firmly behind the Combined Code of Practice, which suggests initial three-year contracts could be made and then reduced to one-year rolling contracts after the first two-years have expired.
Summerfield has also backed NAPF and ABI moves to tackle excessive payoffs for disgraced executives.
He stated that any service contract beyond one-year should be subject to shareholder ratification.
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