FT.com - article

Farewell, Lake Wobegon? Garrison Keillor's fictional town, where all children are above average, has long provided the roadmap for executive pay decisions.When consultants bring in data that suggests the boss is underpaid compared with his peers, directors' natural reaction is to endorse the person the board chose for the top job by giving him a rise.Last year, however, the trend started to reverse, according to PwC. Its review of executive pay at the largest UK companies shows one in six executive directors took no bonus in 2009, while their base salary increases of no more than 1 per cent lagged behind national average pay rises for the first time in 10 years.As for the malign influence of consultants, PwC says that last year, experts may actually have helped amplify the news that it was, for once, cool to cut comp.This year looks different. Remuneration committees are worrying that top managers may walk if their wages and bonuses are frozen again. Overactive consultants could help make a thaw in pay policy become a flood of pay increases.Protest votes at last year's annual meetings should have reminded directors of some basic principles. They need to challenge advisers – and, if necessary, managers – to justify their pay recommendations and demands. They need to consult shareholders earlier. They need to adopt a little of Keillor's Minnesotan unflappability under pressure before reaching for the company chequebook.Above all, they need to make a stronger case for their remuneration decisions. Otherwise, 2009 will almost certainly end up looking like a blip in the otherwise inexorable inflation of unjustifiable rewards for underperforming executives.A question of rebalance Joe Lewis was certainly more interested in Wednesday's game between Tottenham Hotspur and Liverpool than in the boardroom brawl over at Mitchells and Butlers. But then the billionaire investor controls Tottenham and he doesn't control the pubs group.What would happen if he did? His proposals for new board members – including four independent directors – look increasingly likely to win the day at next week's annual meeting of M&B. The biggest shareholder would not control M&B in the sense that he controls Spurs.But such a change would represent a dramatic rebalancing of power. Mr Lewis has now made clear that a 60-day review of the business should be the first act of a refreshed board.M&B's management gets the opportunityon Thursday to lay out the current strategic plan to analysts. Control or no control, if Mr Lewis's proposals are approved next week, it will be impossible for even the most independent-minded chairman to come back two months later with the same slide presentation.andrew.hill@ft.com Kesa-ra, Sera Kesa's supercharged performance in France stands in stark relief to the UK, where the electrical retailer appears to have blown a fuse. Like-for-like sales at Comet slid 3.9 per cent in the 10 weeks to January 8, a period of cheer elsewhere on the UK high street – not least over the road at rival DSG International, where electrical sales were up 8 per cent.Kesa is partly a victim of tough comparables. It outperformed last year, when DSG provided about as much competition as a cathode ray TV; taken over the two years, Comet's sales are roughly flat. DSG, by contrast, would still be down based on actual numbers (retrospective adjustments to reflect the new group structure give a rosier picture).But that offers only some comfort to Thierry Falque-Pierrotin, who took up the reins at Kesa last January.The group as a whole registered a dip in like-for-like sales. Darty France – almost half total revenues – may have bucked that trend, but gross margins are softening as the French pile into lower-margin goods such as laptops and TVs.UK margins are off 50 basis points, again driven by the mix of goods sold, as well as competition. That pressure is not about to go away given the arrival later this year of Best Buy from the US.DSGhas also taken the decision to pay up in order to chase market share, as evidenced by its 0.8 per cent erosion of gross margins year-on-year.Investors, like consumers, favour DSG – the owner of Curry's has comfortably outperformed its rival. Kesa has the new(ish) chief executive but DSG's three-year turnround plan has delivered tangible results.Fans of Kesa point out its relative cheapness: it trades on 15 times estimated earnings to DSG's 27 times multiple, on Bloomberg figures. Fair enough, but as buyers know to their cost, goods are often cheap for a reason.louise.lucas@ft.com