UK - Fund managers are urging the government not to introduce legislation to limit "fat cat" payouts as the rewards-for-failure debate gathers steam.
Fund managers spoke out as the consultation period for the department of trade and industry’s executive remuneration report draws to a close.
Morley Fund Management corporate governance manager Anita Skipper said the DTI needs to appreciate the “abundance” of new initiatives in 2003 – the first year companies have had to put their remuneration reports to shareholder vote.
She said: “The ABI and NAPF best practice policies were good news, but these need time to be put into effect.”
She said that legislation should only be considered if these failed.
And Skipper suggested there were other areas where improvements could be made.
She said fund managers and pension funds needed to be made accountable for engaging with rewards-for-failure, not just companies.
Henderson Global Investors is not submitting a reply directly to the DTI but has participated fully in the consultation as an NAPF member.
Speaking ahead of the association’s response, the fund manager’s corporate governance analyst, Shade Duffy, warned that legislation could cause problems if contracts had to be changed after directors had signed.She added: “In the initial stages of new legislation companies would need to be extremely careful when considering potential payouts.
“Executives are very likely to sue if new legislation undermines contracts already agreed.”
Consultant Hewitt, Bacon and Woodrow agreed and pointed out that there was a need for incentives “for troubled companies to attract talented directors”.
Hewitt associate Leslie Moss warned: “A regulatory regime that moves too far away from an international consensus could have the unwelcome effect of encouraging high-flyers to look abroad for employment opportunities.”
The consultation period for the DTI’s paper – Directors’ Remuneration: Contracts, Performance and Severance – ends on September 30.
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