'Rewards for failure' curbs on hold

TRADE Secretary Patricia Hewitt today said the Government would resist calls to bring in legislation to curb fat-cat 'rewards for failure' - excessive pay-offs to company executives ousted from the boardroom after poor performance.

However, she warned that she will spend the next 12 months keeping an eye on the situation and added that she had not ruled out wider changes in the law if companies do not act with more restraint when agreeing pay deals that reward poor performance.

'I am clear that the best way forward is through the application and development of best practice in negotiating contracts which deal with performance issues effectively, not for companies to enter into inadequate contracts in the hope that legislation will rectify any resulting problems,' she said.

'But if the monitoring which I am commissioning demonstrates that changes to the Companies Act are required, I will not hesitate to take appropriate action in the context of wider company law reform.'

The wait-and-see approach that has been adopted by Hewitt appears to have handed victory to big business in round one of what is likely to be a long-drawn-out battle over executive pay in Britain.

Today's speech comes after eight months of consultation between the Government and business and investors' groups spearheaded by the CBI, the Association of British Insurers and the National Association of Pension Funds.