Letter: Determining a just reward for executives

Sir: Your leading article 'Golden rewards for boardroom failures' highlights legitimate concern about the way in which business leaders are sometimes remunerated. This, of course, also concerned the Cadbury Committee. However, although the matter of disclosure guidelines and the role of remuneration committees put forward by the committee are welcome developments, they will not on their own provide all the answers.

Legal advisers involved in the negotiation of compensation for senior executives will be only too well aware of the concept of mitigation which may ultimately reduce the claim.

However, there have been many instances where well-known individuals, whose experience and reputation have been quickly recruited by outsiders, have been able to achieve continued remuneration from new employers during what would otherwise have been the balance of their service contract.

The key points in the Code of Best Practice recommended by the Cadbury Committee did not extend the role of a remuneration committee to the matter of determining, on advice, the level of compensation to such directors at the end of their

employment.

This fact, however, does not in any way diminish the need for investors to be reassured that the negotiation of prematurely terminated service agreements is being conducted fairly and in accordance with accepted legal principles. There is no reason, therefore, why boards, either through remuneration committees or otherwise, cannot set in place their own firm guidelines to ensure that these matters are dealt with accordingly.

Yours faithfully,

ADRIAN J. MEZZETTI

Gregory, Rowcliffe & Milners

Solicitors

London, WC1

12 May