Lawyers predict contract disputes over Cable's plan

Published: Financial Times | 24 January 2012

Adrian Hoggarth, Head of Employment at Prolegal, comments on questions that are being raised over how the overhaul will work in relation to executive pay.

Vince Cable is aiming to reshape executive pay. If he achieves his aim, it will be the most radical change to remuneration practices for top management in close to a decade.

Whilst practitioners are questioning how the changes will work, lawyers including Adrian Hoggarth are predicting contract disputes. Adrian says, 'What underlies executive pay is a binding contract between companies and their executives ... Companies cannot simply impose unilateral changes on executives without risking claims for breach of contract'.

He comments further on some of the most radical proposals, those of urging companies to include clawback clauses in pay packages and giving shareholders a binding vote on pay plans and payouts to executives that are leaving. Adrian was sceptical that including clawback mechanisms in the voluntary code would work: 'The idea that executives will give up a golden handshake unless obliged to do so is fanciful. The government will need to impose this on companies and executives through new legislation'.

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