Government under pressure on pay perks

The Government faces fresh pressure to legislate on share options and bonus schemes from a Labour Party now ready to require such payments to have the prior approval of shareholders.

The committee chaired by Sir Richard Greenbury, chairman of Marks and Spencer, due to report this summer to John Major on boardroom pay, is expected to give its strong backing to more say for shareholders in determining share option and bonus payments.

It has also made clear its distaste for share option packages, which have recently rewarded top executives with controversially-sized remuneration increases, preferring long-term bonus schemes.

But the committee, which meets again this week, and probably again in July, has not so far thrown its weight behind any recommendation for legislation and there are no signs that it intends to do so. A document going through Labour's policy-making machinery would require not only disclosure of each director's pay and bonus package to shareholders, but also require companies to seek shareholder approval before they are implemented.

A further Labour document also calls for greater transparency by pension fund managers on how they vote at annual meetings of companies in which they invest.

This second proposal has been given new momentum by Labour claims that the Post Office, British Telecom, BBC and Associated Newspapers pension funds all backed the 71 per cent pay increase for Cedric Brown, chief executive of British Gas, which was angrily attacked at last week's shareholders' meeting.

John Edmonds, leader of the GMB general union, yesterday railed against the block vote wielded by City investors in support of big boardroom salaries. He said the GMB wanted to ensure that votes at company AGMs were cast by shareholders themselves, and should be recorded and open to public scrutiny.

Speaking at his union's conference in Brighton, Mr Edmonds said: "We've seen the abuse of shareholder democracy at the British Gas AGM. We also know that companies make key decisions without consulting their shareholders.

"Our campaign will expose the Square Mile mandarins who control billions of pounds and wield enormous power.

"They use ordinary people's money through pension schemes and building societies and yet we don't even know their names," he said.

Gordon Brown, the Shadow Chancellor, said yesterday that the current tax privileges for share option schemes must be removed and added: "Without a commitment to legislate, abuses will continue."

If, as some ministers expect, the Greenbury committee stops short of proposing legislation it will leave Mr Major in a difficult situation.

There are powerful forces in government arguing that legislation is politicially necessary - not least because of the stream of fresh disclosures, such as that of another National Power director last week cashing in share options at a profit of over pounds 500,000.