By Mary Gahan BBC News Online business reporter

Some protesters want laws against "fat cat" pay

Not so very long ago Gordon Brown and other leading Labour lights were pounding the prawn cocktail circuit, wooing business.

"A Labour government will be your friend," they told the City and industry.

Two general elections later, the relationship between the new friends has rather soured.

A stream of tax rises and, now, the threat of the government controlling directors' pay has made business wary.

Trade and Industry Secretary Patricia Hewitt has just published a consultation paper - Reward for Failure - on the controversial subject of "fat cat" pay.

Damaging the UK?

A stream of businesses have already felt the heat of shareholder anger about executive pay at annual meetings.

Among them was GlaxoSmithKline, whose shareholders voted against a deal that would see chief executive Jean-Pierre Garnier walk away with an estimated �22m if the company was taken over.

Organisations should be free to pay the best salaries to attract, keep and motivate the best people Charles Cotton, Chartered Institute of Personnel and Development

The government was behind this sudden increase in shareholder activity because it brought in new rules requiring companies to disclose executive remuneration packages in full.

But while companies have to tolerate shareholder protests, they do not want government interference.

And they certainly do not want laws.

Digby Jones, director general of the employers' organisation, the CBI, says that if the government starts telling companies how much to pay their directors it will damage the UK's ability to operate in the global market.

Union agreement

Charles Cotton, from the Chartered Institute of Personnel and Development agrees.

"Organisations should be free to pay the best salaries to attract, keep and motivate the best people."

We demand legislation to limit fat cat pay Derek Simpson, Union leader

But he warns that companies need to have rational and justifiable pay policies.

As well as seeing a strain in its relationship with business, Labour has also moved further apart from its traditional supporters, the unions.

But fat cat pay is one of those old-fashioned issues where they can find agreement.

"The corporate world has been behaving in a way that is simply not defensible," says Brendan Barber, general secretary of the unions' organisation the TUC.

He argues that if companies and shareholders cannot get to grips with the issue of excessive pay than legislation is the only answer.

Payments for failure

Derek Simpson, joint general secretary of Amicus, and one of the new "awkward squad" of left-wing union leaders goes further.

"We demand legislation to limit fat cat pay, with a workers' representative on every remuneration committee of a publicly listed company," he says, arguing that the consultation paper is a "sop" to the CBI.

In the current climate no business leader will stand up and defend multi-million pound payoffs for executives who have failed their firms.

But business argues that it should be up to company boards and shareholders to get rid of payments for failure.