PracticeConsultingDTI defends company law proposals

DTI defends company law proposals

The Department of Trade and Industry's has defended its proposal to limit the length of employment contracts offered to company directors to one year following criticism from institutional investor bodies.

The DTI said the cap on contracts and severance pay was a way of levelling the playing fields in the treatment of directors and ordinary employees, the Financial Times reported on Saturday. In addition to the restriction on contract duration, the steering group proposes placing an accompanying restriction on severance payments of one year’s pay.

Jonathan Rickford, the director of the review project said company directors were in an exceptional position and often enjoyed far better terms of severance than ordinary employees.

Institutions such as the Confederation of British Industry and the Association of British Industry are not happy with the proposals, saying the change in the law would reduce the ability of UK companies to attract and retain the best employees, a serious problem facing big business today.

The changes to the law, which dates back to Victorian times, are part of a wide-ranging government review of company law. The aim of the changes is to encourage good corporate governance and shareholder participation.

In a related issue, the DTI review proposed that the residential addresses of directors and shareholders not be publicly disclosed, except to appropriate authorities. This was in response to activists who have targeted people linked with controversial companies.

However human rights pressure group Liberty claimed that this was a ‘disproportionate response’ land would make it harder to pursue dishonest company directors and those holding multiple directorships.

Links

Ward says company law must ensure probity

Technology overlooked by law review, says ICAEW

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DTI website

Company Law Review website

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