'Rewards for failure' curbs on hold

THE GOVERNMENT today bowed to pressure from big business as it shelved laws to curb excessive pay-offs to ousted directors.

The threat of a clampdown on rewards for failure has not gone away however, as Trade Secretary Patricia Hewitt warned that in the next 12 months she will be watching to see if companies act with more restraint.

'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 Government has spent eight months consulting on executive pay with business leaders and investor groups spearheaded by the CBI, the Association of British Insurers and the National Association of Pension Funds.

This followed a string of hig-profile awards including Tim Byrne, former chief executive of holiday group MyTravel, who was sacked with a £1.2m pay-off after 'accounting irregularities' resulted in a £73m loss. Adam Singer, former Telewest chief executive, banked £1.8m when he left after the firm neared collapse.

The CBI and the ABI welcomed today's announcement. The Government will monitor the forthcoming season of annual meetings at which investors will get their chance for only the second year running to vote on pay policies since the Directors Remuneration Report Regulations were introduced in 2002.