Investors square up for round two

THE fireworks and 'fat cattery' of 2003 may be missing from the coming season of annual general meetings. But institutional shareholders show few signs of loosening the grip they have secured on the throats of major companies.

Investors seem to feel they have won on points in the first round over executives' pay and their service contracts.

Yes, some huge packages will be put to the vote in coming months, but remuneration committees are trying to make sure they are far more closely linked to performance. They have also taken trouble to consult more widely, so that shareholders are not taken by surprise. And service contracts of longer than a year are now the exception.

But far more attention will be focused on the pernicious business of 'options retesting'. This is where executives are given share options to be cashed in on certain performance criteria, usually three years down the line.

But if the performance criteria are not met, directors have had a nasty tendency to say: 'Hey, we'll simply wait until things improve and the criteria are met.' Options therefore become an even more solid one-way bet.

Remuneration consultants argue that some companies - particularly those recruiting in the US, where attaching any strings to massive share and option awards is regarded as heresy - need to retest. But catering group Compass and pubs company Mitchells & Butlers have said they will abandon retesting, a move that looks likely to be followed by about a third of FTSE 100 companies.

Another third are said to be putting the issue on hold, promising shareholders to report back next year. But senior consultants say the rest are ready to try to face down the opposition.

Investors are also keen to see far stronger justification for the annual bonuses companies pay executives. But companies claim it would be commercially sensitive to reveal targets such as revenue growth, which underpin cash bonuses, even if disclosure is a year or more after targets were set.

However, most attention is likely to focus on the independence of company non-executive directors. This was a major plank of the Higgs report on corporate governance. Investors increasingly demand the appointment of non-executives who have no previous connections with a company, have been on the board for only a few years and are, therefore, at least potentially able to take a dispassionate view of the strategy and behaviour of executives.

Many major companies are vulnerable and are beginning to squirm. Having been so badly bruised by last year's high-profile confrontations, they would dearly love to avoid trouble this time.

There is undeniably a shortage of traditional non-executive talent. Though this issue is probably simmering rather than boiling, companies will have to stretch their thinking on what makes a suitable non-executive if they are to head off a major showdown with shareholders this time next year.

The wonder of antimoney laundering

Britain's bizarre world of antimoney laundering activities has strayed into Alice in Wonderland territory. It may be understandable that banks and financial institutions should check the credentials of customers to make sure they are not depositing the proceeds of crime -though over-zealous fines imposed by the FSA risk encouraging organisations to cover up failings rather than report them.

And it is not beyond the realms of possibility that an accountant, tax adviser or lawyer might need to scrutinise some clients.

But now we have the ludicrous suggestion that estate agents should be brought into the fight against this crime, very few instances of which have come to light with the exception of £700m pumped through accounts by a former president of Nigeria.

As a senior commercial property consultant pointed out, almost all land or property deals involve a solicitor who is obliged to check the client. They are also likely to involve some kind of finance from a lender, who is obliged to check the client.

Quite what an estate agent would bring to this party is anyone's guess. And with their reputation for honesty and integrity, it hardly feels like a case of 'safe in their hands'.