26 September 2003
Press Notice 95
REWARDS FOR FAILURE
Publication of the Sixteenth Report
The Trade and Industry Committee today published its report, Rewards for Failure, on executives' severance pay.
Amongst its conclusions are:
That there is a genuine cause for concern that some executives are receiving excessive severance packages.
That this is not the result of an international market for scarce talent - UK directors are more generously remunerated than in almost any other country - and the Committee hopes that the recent examples of shareholder revolts will prompt companies to look hard at the way in which executives' contracts are constructed.
That executives' notice periods should be the same as those applicable to the rest of the population.
That phased payments can reduce the problem but only if the duty to mitigate loss is properly enforced
That self-regulation is preferable to legislation but should not be ruled out if improvements are not made.
Martin O'Neill MP, the Chairman of the Committee, said "We are convinced that this is a genuine problem. However the recent examples of increased activism by institutional investors, and the promotion of best practice has the potential to remedy the situation. The Government should wait to see the effect of these developments before it considers legislative remedies".
Copies of the Sixteenth Report can be downloaded from our website: (www.parliament.uk/commons/selcom/t&ihome.htm)