Godfrey Exit Casts Doubt Over City Pay Probe

A far-reaching probe into Britain's executive pay culture could be threatened by the ousting of its architect as the boss of the fund management industry's trade body.

Sky News has learnt that the Investment Association is likely to reconsider a decision to undertake the inquiry, which was launched last month by Daniel Godfrey, who stepped down on Wednesday as the organisation's chief executive.

Heavyweight City figures including the chairman of J Sainsbury (Other OTC: JSAIY - news) , the chief executive of Legal & General (LSE: LGEN.L - news) , Boris Johnson's pensions czar, and the Investment Association's chairman, Helena Morrissey, are among the members of a panel set up to scrutinise executive remuneration.

However, sources said that while no decision had been taken to scrap the review, it was unlikely to proceed formally until Mr Godfrey's successor had been appointed.

The review is intended to consider whether long-term share awards should be scrapped as part of the panel's work, which would trigger an overhaul of the way Britain’s top public company bosses are paid.

Investors have become increasingly concerned that the complexity of remuneration schemes is obscuring proper scrutiny of their performance.

Mr Godfrey told Sky News last month: "Between companies, investors, government and the media, we’ve failed to make executive pay an obvious reward for exceptional personal contribution.

"The Working Group’s objective is to make a real difference by bringing the simplicity that makes transparency meaningful to the issue.

"This could be the starting point for a new relationship between highly paid executives, their stakeholders and society."

Mr Godfrey was effectively ousted as the Investment Association's boss this week after Sky News revealed that M&G Investments and Schroders (LSE: SDR.L - news) , two of its biggest members, had served notice of their intention to terminate their involvement with the body.

They - and others - had expressed concerns about Mr Godfrey's priorities in the role.

The split has occurred at a critical time for the industry's reform agenda, with some observers suggesting that the crisis could diminish the Investment Association's influence in Europe.

Under Mr Godfrey, the body played a key role in establishing the Investor Forum, a new body set up to improve dialogue between institutional investors and large quoted companies.

Among its other key projects has been an effort to increase the level of disclosure about fees charged by asset managers, which many industry executives regard as a shrewd move to pre-empt more draconian regulation.

The Investment Association also took on the key role of day-to-day engagement with listed companies by absorbing the investment affairs function of the Association of British Insurers (ABI).