The proposed bill, which has the backing of the Tory leadership, would allow companies to override contractual obligations made to directors if they underperform, who are then sacked.

Writing in today's FT Mary Francis, director general of the Association of British Insurers and Christine Farnish, chief executive of the National Association of Pension Funds, said the bill contained no definition of the word 'failure' nor would it be easy 'to ascribe responsibility for failure to any one person'.

They also claimed any executive affected by the bill would stand a good chance of reversing this position through an appeal in court, setting a legal precedent confirming directors' rights.