Amazingly, Even the Fat Cats Themselves Have Started to Rebel against Other Fat Cats Raking in Such High Rewards. (the Business)

Article excerpt

Fat cats, schmat cats. Veteran war correspondents become inured to gore and suffering: financial journalists are starting to feel the same about boardroom pay.

We have seen so many undeserved seven-digit packages, so many pay-offs rewarding failure, so many shameless pension top-ups. We shrug when four directors of the cable group Telewest get a total [pounds sterling]690,000 in "performance-related bonuses", their performance being to preside over a business brought to its knees. We yawn and turn to something more interesting, like the shape of the yield curve when Tesco reports that no fewer than eight of its directors hit the million-pound jackpot last year.

But the recent spat over executive pay at Prudential was different. Jonathan Bloomer, the chief executive of Britain's biggest investment institution, was ambushed by his own peers.

The mighty Pru was forced to shelve its executive bonus scheme just 24 hours before a shareholder vote because of a revolt led not by a handful of Labour-controlled council pension funds but by six of the biggest City institutions, including C GNU, Legal & General and Standard Life, which could normally be relied on not to rock the boat.

Two of the rebels were not exactly squeaky clean when it came to their own rewards. Pm executives were angry anyway that after five months of consultation these shareholders were kicking up a fuss at the last minute. But they were absolutely seething that one of the rebels could be Schroders, an organisation renowned for its boardroom excess and for its quaint and quirky forms of governance.

Another rebel was Barclays Global Investors, a subsidiary of Barclays Bank, which is headed by Matt Barrett. Barrett's own pay package is a) just as complex and b) potentially just as enriching as Bloomer's would have been.

The dispute has been well aired, except in one respect: the role played by remuneration consultants in the Pru affair and in other fat-cat rows.

Remuneration consultants are the outside experts brought in to devise top pay packages. They are responsible for making them so fiendishly complicated that even fellow experts can only hazard a guess at how they work or how much they might pay out. They give spurious respectability by sprinkling the explanation of the schemes with references to "stretching targets" and "international best practice". And they are responsible for ensuring that directors always seem to collect, however dismal the company's performance. …