Multi-million pound payoffs for directors of underperforming companies could be a thing of the past, under proposals being put forward in the House of Commons this week.

Archie Norman, the conservative MP and former chairman of supermarket chain Asda, is putting forward plans to change the current legislation which allows directors who are sacked to receive their full pay deal.

Under the new rules, board members would have the power to negotiate on termination payments and relate them much more to performance.

Mr Norman told BBC Radio 4 he was proposing the changes so that "the boards have to take into account the performance of directors in considering the payoff that they receive".

Golden handcuffs

In the past 18 months alone, a number of high-paid exits have angered shareholders who have been left with a poor return on their investment.

The ousted chief executive of Marconi, for example, Lord Simpson, was given a �300,000 'Golden Goodbye' and a reported �2.5m in pension payments last year, despite the company's plummeting value.

And Sir Peter Bonfield, former chief executive of BT, left with �1.5m in his pocket regardless of the fact that the company had lost half its market value the previous year.

Under current legislation, when a director who does not receive what he or she considers a suitable exit package, the court places little weight on the company's performance.

Mr Norman said: "The one thing that has brought business into disrepute in this country more than anything else is the perception that when a company fails, the directors deposit with a wheelbarrow full of cash and the ordinary shareholders get nothing."

Changing the rules

However, the Conservative MP's Private Members Bill will be heard in the House of Commons this week and Mr Norman is seeing it as a challenge to the government's willingness to change current pay deals.

"It will be an interesting test for the government as to whether they want to solve this problem or not."

A survey by Incomes Data Service (IDS) in October suggested that leading executives of the UK's top 100 companies earned around �1.5m in the past 12 months.

This was a rise of almost 10% on the previous year and, while a slower jump than in previous years, still puts the majority of employee rises in the shade.

However, there was some glimmer of hope last month, when shareholder pressure forced GlaxoSmithKline to postpone plans for a multi-million pound pay rise for its chief executive Jean Pierre Garnier.