Giant Standard Poodles Article

Remember the late 1 980s, when we were all so shocked that BOG's chief executive Richard Giordano had made a million for the first time? Times have moved on: there isn't a single executive in the Royal Bank of Scotland boardroom, for example, who doesn't make well over [pounds sterling]1m a year.

Students of fat-cattery can detect three phases in the recent history of boardroom greed. First we had denial. Companies rejected the idea that there was any problem, or indeed any serious concern among their shareholders. They trotted out the usual cliches about executives getting "the going rate for the lob" and "the need to attract and retain the best talent" and the fib that pay "aligned the interests of executives with shareholders".

Then came the obfuscation phase, which began two or three years ago. In response to growing shareholder and public disquiet, companies started to disgorge mountains of information about directors' pay. But not much of it was of any use. Remuneration reports within annual reports went on for pages and pages, but there was no way of ascertaining how generous the bonus packages were because they depended on enormously complicated formulae and targets. After a few hours wrestling with LTIPs (long-term incentive plans) and comparator companies and the Black-Scholes formula for valuing share options, even the most persistent shareholder reached for the aspirin and gave up.

Now we have reached the third phase, which could be termed the legitimisation stage. This is where directors call in supposedly independent experts to justify all the gravy sloshing around. Take Anglo American, the international mining giant, which is headquartered and listed in London. According to its annual report, the board first hired Arthur Andersen to advise on boardroom pay. Then, after Arthur Andersen ceased to exist, Anglo got Ernst & Young to advise on compliance with the latest regulations on directors' remuneration. The company also brought in Monks Partnership, an offshoot of PricewaterhouseCoopers, to "provide market remuneration information throughout the year". Not content with Monks's efforts alone, it hired another consultancy, Towers Perrin, to do the same thing. It finally engaged Mercer, another consultancy, to assure the shareholders that its remuneration processes were in line with stated company policy.

So we have five different sets of consultants advising on the pay of just four executives. It is madness. But it gets even more surreal, because it turns out that most of these outside consultants aren't even independent to begin with. Ernst & Young takes fees from Anglo for tax advice; PricewaterhouseCoopers also provides tax, actuarial and audit advice; Mercer provides actuarial and investment advice to Anglo pension funds. All three firms therefore face a potential conflict of interest. How can they provide objective advice on the pay of Anglo executives when they rely on those same executives for their fees?

The crowning irony is that presiding over this absurdly elaborate apparatus is Rob Margetts, the chairman of the Anglo remuneration committee, who also happens to be chairman of Legal & General, one of Britain's biggest institutional investors. What on earth would L&G's millions of policyholders make of it all?

It may be unfair to single out Anglo. Its executives by no means top the league. The chief executive, Tony Trahar, got [pounds sterling] last year but at least he is regarded as doing a competent job.

But sometimes it seems as though the the new corporate governance rules have succeeded only in spawning an entire new industry of poodles and propagandists to justify what in many cases is unjustifiable.

One of the great taboos of corporate Britain was broken the other day and strangely it was a Japanese firm -- a species renowned for conformity - that did the deed. Honda announced plans to axe the retirement age of 60 for its Swindon workers, demanding that they work an extra two years to earn a full pension.

This is the first time anyone can remember a company lifting the retirement age across the board. But it is almost certainly a taste of things to come. There is barely an occupational pension fund left in Britain that is not staring at a black hole. Most have closed to new members. But even this may not be enough to offset the double whammy of rising longevity and falling investment returns. The chances are shortening that we, or certainly our children, will either have to accept lower retirement incomes or face plodding on till we are 70.

Patrick Hosking is deputy City editor of the London Evening Standard