Pension funds tackle board pay

THE National Association of Pension Funds, whose members own a quarter of all British equities, has waded into the boardroom pay row with the launch of an executive pay assessment kit.

It has produced a multiple choice questionnaire designed to encourage companies to act responsibly on remuneration and help institutions work out w hether executive share schemes cut the mustard. The NAPF is also working on a cribsheet for the chairmen of remuneration committees, posing 10 questions that every chairman should answer.

The move follows widespread outrage over the pay-offs given to the likes of Sir Peter Bonfield, who is quitting BT ahead of time with about £3m to comfort him, and Ken Berry, who left EMI abruptly last month and is expected to receive more than £3m.

NAPF's kit focuses on ensuring that efficient contracts are drawn up when executives are appointed so that their pay packages do not jar with investors and they are not excessively compensated if they leave the company prematurely.

'We are expecting a period of recession and this is the time when non-executive directors need to earn their fees and make sure executive remuneration is linked to good corporate-strategy,' said John Rogers of the NAPF.

The association hopes that its questionnaire will defuse tension over pay by offering companies the chance to work out in advance of discussions with investors whether their pay schemes pass muster. The kit will also be available to remuneration consultants who are frequently responsible for compiling executive pay schemes.

'These people are like double-glazing salesmen. They tell companies that schemes will go down fine with institutions and then boards are shocked when investors protest,' said Rogers.

A checklist on the quantity and quality of share awards and a questionnaire with Yes, No or Partial boxes to tick is part of the kit. The 10-point crib is likely to include questions such as: 'Would you be able to describe the features of a new pay scheme to institutions?'

Focus on remuneration committees has increased following the Government's controversial decision to force companies to put their committees' reports to an annual vote by shareholders. The NAPF is also staging seminars for non-executives to teach them how to act. Often these directors are former executives who are unsure how to adapt to their new roles, according to the NAPF.

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