Minister passes buck on bosses' pay

The Government yesterday put responsibility for directors pay firmly onto the shoulders of industry and shareholders, after a top level City and industry committee was established to draw up a code of good practice within six months.

Michael Heseltine, President of the Board of Trade, welcomed the committee, chaired by Sir Richard Greenbury, chairman of Marks & Spencer, saying: ``It must be for the private sector to produce a workable code of conduct for companies to follow.''

Mr Heseltine ruled out any Government attempt to regulate boardroom salaries in the wake of the row over the 75 per cent increase for Cedric Brown, chairman of British Gas.

He said: "If we want the best newspaper editors, the best pop stars, the best football players, it is a pretty dangerous road to go down and say that the moment they actually get into world class pay scales we are going to regulate them."

The committee was set up on the initiative of the CBI, after heavy hints - but apparently no direct request - from the Government, which has been anxious to get the issue off its plate.

Within the committee, which has a remit to rebuild public confidence in the way directors' pay is set, there are already signs of jostling for position The Institute of Directors is due next Tuesday to publish its own proposals, including a call for muchgreater disclosure. The CBI said the IoD proposals would be taken into account.

Key areas to be examined are share options, bonuses, contract lengths, disclosure, communications and the effectiveness of remuneration committees.

Mr Heseltine described any attempt to regulate boardroom salaries as having "disastrous" consequences for firms and added that singling out the privatised utilities, as Labour suggested, would leave them unable to recruit the best staff.

"That would be simply to say `We're going to keep a second-class tier of companies like British Gas, British Telecom and the power companies'." Mr Heseltine said on BBC Radio 4's World at One.

Gordon Brown, the shadow Chancellor, said: "He [Heseltine] seems to have more sympathy for privatised industry bosses than the unemployed. To refer to people like Cedric Brown as `poor' may delight highly-paid bosses but will horrify ordinary workers."

Sir Michael Angus, chairman of Whitbread; Sir Denys Henderson, chairman of ICI, and David Simon, group chief executive of BP, are joining Sir Richard's committee alongside representatives of the Institute of Directors, the National Association of PensionFunds, the Association of British Insurers and the Stock Exchange.

Sir Richard said:"We are trying to put together, through the committee, the views of a very large range of people who will hopefully allow us to pick our way through this and come up with proposals and a code of practice that will be acceptable to everybody.''

He described boardroom pay as "a political and media hot potato", but said the number of abuses was very small. But all were agreed that legislation would be wrong, he said.