Greenbury supporters turn guns on critics

PETER RODGERS

Business Editor

Tim Melville-Ross, director general of the Institute of Directors, yesterday warned critics of the Greenbury Committee on top pay to stop fighting key recommendations and to support the whole of the report rather than undermine it.

Mr Melville-Ross, a leading member of the committee, said: "Tinker with bits of it and you will undermine the whole."

His decision to go public is the highest-profile development in a campaign by committee members against a rearguard action from boardrooms to modify the Greenbury proposals, especially those on long-term incentive schemes and pensions disclosure.

Last month Geoff Lindey, the pension fund representative on the committee, attacked "powerful voices" which he said had a vested interest in seeing it fail. Sir Richard Greenbury is also understood to be conducting a private campaign at senior levels to defend his report.

Mr Melville-Ross put himself into direct opposition to his own president, Lord Young, the former chairman of Cable & Wireless, who called recently for an end to over-regulation of the boardroom.

Mr Melville-Ross said: "We spent a long time trying to get the balance right. Not every member of the Greenbury Committee agreed with every detailed recommendation, but we all subscribed to the whole. The result should be recognised for what it is - an important step forward and an important bulwark against wholly unacceptable legislation."

In an interview with the Independent amplifying remarks in a speech last night to the Institute of Chartered Secretaries, Mr Melville-Ross said there were a number of issues where there was backsliding from Greenbury, both formally - in the drafting of new Stock Exchange listing rules - and informally, when meeting people "at City cocktail parties".

The Exchange is responsible for changing its rules to take account of the Greenbury recommendations. Mr Melville-Ross said one concern on the listing rules was the Exchange's draft proposal that shareholders should vote on long-term incentive schemes only when they covered periods of three years or more.

The report said there should be a vote on anything longer than one year but the Exchange's proposal "with the best will in the world" was an incentive to companies to pitch incentive schemes between one and three years, and prevent consideration by shareholders.

He also attacked the Exchange's definition of long-term incentive scheme, but for being wider than the committee intended, catching pensions as well. "The way long-term incentive schemes are being defined in the draft listing proposals appears to catch other things as well," he said.

The committee proposed tough disclosure rules for pensions based on the increase in value to a director each year, but asked the institute and faculty of actuaries for a recommendation about how to calculate this. The proposal caused a storm because it will show enormous annual pension values when directors receive large salary increases.

Mr Melville-Ross attacked an attempt to water the actuaries' calculations down by averaging the value of pension increases over a number of years, which he said was "not to hide but to smooth the changes. I don't like the idea. If you are going to have a significant impact you ought to declare it and justify it to shareholders."

He said the informal "mutterings" against the report included claims that the committee had been too tough, for example in favouring one-year rather than two- or three-year contracts - although the report was worded to allow exceptions.