Help for investors to curb fat cats

INVESTORS are to receive extra backing on whether to throw out company directors' pay and options packages, in a new clampdown on fat cat payouts.

In the next few weeks, shareholders will be able to make use of a new ratings service. It will help them decide how to vote at the 600 or so annual general meetings this year. The ratings service has been set up by Pirc, the corporate governance advisors. They represent 60 institutions, with more than £350bn under management.

Pirc will award a score based on the letters A to C for new share incentive schemes and renumeration reports. If a 'C' is given for just one aspect of a scheme, Pirc will recommend it be thrown out. Previously, Pirc simply gave a voting recommendation for the whole scheme.

Companies will also face new requirements to get high marks. For example they must justify why their renumeration policy is the right one for their industry.

High-profile cases of 'rewards for failure', such as that of former Marconi boss Lord Simpson, and lucrative share option schemes without tough performance targets, such as that planned by DFS Furniture, has increased pressure to be vigilant. Investors are also becoming more willing to voice their anger.

Pirc said many companies use expensive pay consultants to devise complex reward packages. 'Often investors don't have the same resources to scrutinise them. The ratings system tries to redress the balance.'