THE City minister Lord Myners has issued a “call to action” to institutional investors to police more effectively pay and risk in business.

Myners, a former fund manager, has rebuked his former colleagues for failing to challenge some of the practices that became commonplace during the boom. He said: “Their ability to exercise an effective challenge on governance issues has not been as good as it should have been. Were they asking the right questions about strategy and risk appetite?”

He added: “There are some big issues that the Association of British Insurers [ABI] should be speaking up about. The whole culture that the compensation structure was designed to encourage may not have been appropriate. There are issues around perceived fairness. It does not seem right that people in investment banking should be rewarded in the way – and the quantity – that they were.”

Myners said he believed the ABI had not been addressing some of these issues.

However, there are signs that this could be changing, and a pay row at Bellway, the housebuilder, could be a catalyst for it. Investors in Bellway will this week lodge a protest vote against a controversial pay package that awarded salary increases and bumper bonuses to the chief executive and two other directors.

One leading shareholder told The Sunday Times that he would vote against the remuneration report at its annual meeting this Friday to issue a warning shot to other firms considering fat-cat pay rises for their executives. “To put up salaries at all this year is absurd. Some companies seem to think that inflation is the base position for directors’ pay. In my mind nought should be the base position,” he said.

Separately, Sir Sandy Crombie, chief executive of Standard Life, has warned that overregulation of the financial sector once the current crisis is over will stifle enterprise and innovation. He said governments had to take their share of the blame for fuelling the crisis. “Crises will happen. Crises will emerge again but you have to bear in mind this crisis was not precipitated entirely by the financial sector,” said Crombie.

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