§ The Secretary of State for Trade and Industry (Ms Patricia Hewitt)I have today placed in the Libraries of the House copies of a consultation document entitled "Rewards for Failure: Directors' Remuneration—Contracts, Performance and Severance".
The Directors' Remuneration Report Regulations 2002, which I introduced last year, improved disclosure and shareholder accountability in relation to directors' remuneration in quoted companies. As a result, we have seen a welcome increase in the level of shareholder activism on this issue: it is for the shareholders, as the owners of companies, to ensure that remuneration levels and structures provide the appropriate incentives and that directors are held to account for company performance. The new regulations need to be given time to demonstrate their full effect. In the meantime, there remains a justified degree of shareholder and public concern about the level of compensation payments available to directors when they leave a company which has performed poorly. This consultation explores a range of possible best practice and legislative options in the area of directors' contracts, performance and severance payments and the linkage between them. Its purpose is to seek views on to what extent further measures might be required to enable shareholders to ensure that any compensation reflects performance when directors' contracts are terminated. The consultation period ends on 30 September 2003.