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There have been many
concerns about the amounts paid to directors whose contracts are terminated.
Often this appears to be because of failure by the director concerned, and
yet he can be paid more than he is contractually entitled to receive. Hence
the commonly used phrase "rewards for failure". Sometimes these "dismissed"
directors move into new positions with other companies very rapidly, with
the result they are better off than if they had continued to be employed by
the terminating company.
A particular issue here is also the
length of service contracts, where multi-year rolling contracts are now
frowned upon. In such cases, it can be very expensive to remove a director.
UKSA would like to see
some limitation on severance payments, more information provided to
shareholders, and more control on their amount, before they are paid. The following document
was a submission to the DTI on the subject of Director's Contracts,
Performance and Severance in October 2003:
Director's Payoffs.
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