Key Points:

Electricity and gas distributor Vector has pulled a proposal to increase the fees paid to its directors.

Chairman Michael Stiassny today said economic conditions had driven the board's decision.

"Given the local and global economic conditions, the directors no longer believe asking shareholders to approve fee increases is appropriate," he said.

Vector's shares are 75 per cent held by an Auckland-based consumer energy trust.

The company said its board had unanimously agreed to withdraw the proposed increases to their annual fees. Shareholders had been due to vote on the proposal at Vector's annual meeting on October 23.

Vector said its directors' fees had not been increased since before the company's initial public offering in 2005.

It had proposed increasing the chairman's fees by $40,000 a year to $220,000. The proposed increase for other directors had been $20,000 a year to $110,000.

Mr Stiassny said the Vector board could not accept a fee increase against a background of increasingly tough times for New Zealanders, with predictions of greater levels of unemployment, uncertainty in the housing market and pressure on households.

"We believe this is the type of leadership our shareholders would expect from us."

Vector shares were down 5c, or 2.4 per cent, to $2.03 about an hour after trading started on the sharemarket today, as the broader market fell 3.7 per cent.