UK-based Packaging giant Rexam has bowed to shareholder pressure to change the length of contracts for newly appointed board of directors in response to criticisms that the current two year contracts are now outdated.
The move comes follows growing demands from shareholders to reduce board of directors employment contracts in an effort to avoid long-serving, under-performing board members draining company resources with their substantial salaries.
Rexam chief executive Rolf Borjesson, credited with the current upturn in fortunes for the company, has decided to go with the shareholders suggestion made at the last Annual General Meeting in May of this year. "We are step-by-step changing to one- year contracts ... because there is a very clear view from shareholders that they only want to see one-year contracts. I have a two- year contract, but that will change," Borjesson said.
The company did however say that it would continue to award two-year contracts to directors who are hired from outside the UK, adding that after the initial contract, one year contracts would then be offered.
In the UK in particular, companies are highly accountable to their shareholders. The entitlement for shareholders - no matter how small their shareholding in the company - to make their opinions known at AGMs can have a major influence on company policy. Recent scandals over 'fat cat' executives receiving huge pay offs despite the continuing under performance of a company has raised awareness of directors' salaries and made it a hotly debated topic, causing many companies to change their means of employment for executive board members.