Hewitt's crackdown on fat-cat pay welcomed by employers

Business leaders yesterday welcomed Government proposals to crack down on "golden goodbyes" for executives but warned that legislation that overrules existing boardroom contracts would be highly damaging for the UK's corporate reputation.

Digby Jones, the director general of the Confederation of British Industry, attempted to stop further legislation in its tracks: "I would hate there to be legislation that acts retrospectively. Britain's reputation around the world as a country which ignores existing contracts would not only stop executives from coming here but also would prevent investors from putting their money here."

The strong words came after Patricia Hewitt, the Trade and Industry Secretary, made clear in her long-awaited consultation paper on ways to curb controversial payments for failure that the Department of Trade and Industry had not ruled out changes to company law.

The document "explores a range of possible best practice and legislative options," Ms Hewitt said.

Mr Jones said companies were ready to "put their own house in order". The CBI will attempt to show the Government it has grasped the initiative when it issues its own proposals for a code of conduct on executive pay in early July.

The proposals, which are being put together by a committee of business leaders including Sir Nigel Rudd, chairman of Pilkington, may include the suggestion that executives should receive annual bonuses in shares in order to tie rewards to performance, Mr Jones said.

While the CBI broadly welcomed the tone of Ms Hewitt's consultation paper, unions reacted angrily. They claimed the DTI paper, entitled Rewards for Failure lacked "teeth" and pandered to the business community. Derek Simpson, joint general secretary of Amicus, said the consultation paper was a "sop" to the CBI and said urgent action to tackle "outrageous corporate greed" was needed.