THE Confederation of British Industry has issued guidelines on directors' severance packages in response to a Government consultation.

The Department of Trade and Industry carried out a review of the amount paid to the bosses of failing companies when their contracts were terminated.

The CBI yesterday outlined a proposed "flexible and transparent framework" for Britain's blue-chip companies.

It included immediate disclosure of contractual terms and conditions, one-year rolling contracts, part-payment in shares and regular contractual reviews.

It also outlined ways of handling the different elements of severance packages - basic pay, earned bonus and pensions.

Digby Jones, CBI director general, said: "The CBI is unequivocally against rewards for failure.

"There has been a small number of well publicised cases where severance arrangements have given the wrong signals.

"It is vital that the business community works hard in every way at polishing its reputation with the wider community.

"The standing of business is at stake and must be tackled, but in a way that ensures world-class companies can attract top international business people and retain and nurture home-grown talent."

l MR Jones' popularity among CBI members has led to a renewed two-year appointment to the post.

The director general, who took over in January 2000, had been due to leave the £295,000-a-year post at the end of next year after serving his original five-year term.

However, the group said following strong demand from its members, he had agreed to stay on until the end of 2006.

CBI president Sir John Egan, said: "No one fights the corner for business more energetically and effectively than Digby Jones."