Executive pay, reward, failure: Pandora's box

I wonder if our Labour Party Leader Gordon Brown numbers any senior executive remuneration experts among his friends and acquaintances? My immediate reaction to the bank bailout story was to ask on Robert Peston's blog if he could do a sidebar on severance packages for humbled British bankers. This blog has taken an astonishing number of hits since 0800 this morning. Then I spotted Nick Robinson goading the government about other nationalisations. Cheap political points when the global banking system faces systemic failure seem inappropriate in the circumstances. I asked him whether he shouldn't be taking a closer look at senior executive service contracts.

As always in life the devil is in the detail, and this one escaped the box long before anyone anyone could write at all, let alone draft an employment contract.

In his speech at Reuters earlier, Gordon said:

As you would expect the government will protect the taxpayers interests at all times. So as part of this plan we are laying down clear conditions to ensure that the taxpayer gets a fair deal.

· no rewards for failure.
· no cash bonuses this year for the boards of banks receiving public money
· no dividends paid until the government’s preference shares have been fully redeemed

And future remuneration will be based on performance and long-term value creation.

All I would urge, prime minister, is proceed with caution - what you are proposing amounts to the re-writing of every single senior executive service contract currently in operation. I have never come across a single one that didn't make reward for failure pretty much a foregone conclusion. If anyone has a pro forma service contract that avoids such perverse outcomes, please let me know.