Mr Peter Giller, chief executive of International Power, could be regretting his decision last August to become the first head of a FTSE 100 company to be paid solely in shares.

He has seen the value of his remuneration package fall by about 8 per cent - the equivalent of £160,000 sterling (€250,500) - despite the company outperforming the FTSE 100 by 11 per cent. His peers, by contrast, enjoyed an unparalleled 16.7 per cent increase in their average total pay last year.

Mr Giller maintains, however, that he made the right choice, in spite of the general malaise in the equity markets and weakening in US power prices that has caused the share price to fall.

"I was down by more than £600,000 in January but it is all virtual money," he says. "This is a three-year opera and we are only on act one so far. The fat lady certainly hasn't sung yet."

A German from Hameln, home of the fabled Pied Piper, Mr Giller is determined to lead by example rather than by rhetoric. He elected to swap his £500,000 salary, plus pension, healthcare and car, for £2 million of shares, a third of which will be released every year of his three-year contract.

Such a move is more common in the US where Mr Giller spent 28 years running power plants. International Power wanted to develop a more entrepreneurial spirit following its split from the former National Power group in early October.

It is worth pointing out that Mr Giller has not been left destitute by his decision to eschew a monetary salary. He was already a wealthy man after 11 years as president of ABB Energy Ventures, a division of the Swiss manufacturing giant, and is also entitled to a weekly cash "allowance" of £1,100.

Last year he drew only 60 per cent of this allowance to rent his two-bedroom flat in St Katherine's Dock, near London's Tower Bridge. He admits he is now using the full amount but "only because my wife wanted another room and the rents are crazy in London".

Mr Giller's unusual approach has helped to shake up the company after years of producing solid but unexciting results as a division of National Power. When he arrived, the internal walls of the group's headquarters near St Paul's cathedral were torn down in an attempt to stimulate better communications.

The office of Sir John Collins, the former chairman, was converted into a trendy coffee bar and his once-private balcony was opened up for everyone's use.

The effect is to create a working environment similar to that of an internet start-up. However, unlike the excesses of the early dotcoms, Mr Giller is keen to stress the importance of earnings and the need for frugality. All staff, for example, have to fly with a budget airline for any journey less than eight hours.

"Things like this will not swing our profitability but it is about getting a mind set. People have to have respect for money," he says.

About 220 of the group's staff are incentivised through share options and stand to double their year's salary if the share price doubles. The approach seems to be working, with the company on track with its power station building programme and analysts' consensus forecasts suggest it will achieve 20-25 per cent annual earnings growth over the next four years.

Mr Giller's pared-down philosophy extends into a desire not to overstretch the group by focusing only on three main geographical areas - Europe/the Middle East, North America and Australia. Latin America, Africa and Asia are off the list because the markets for independent power producers are either too small or too uncertain.

He has not been tempted so far by any large corporate deals, but does not rule them out in the future if the price is right. He insists such deals are not needed to meet the group's growth targets, which will be achieved through a combination of new-build projects and power plant acquisitions.

The bulk of International Power's current power station building is taking place in the US, where it expects to bring 1,670 megawatts (MW) of capacity online by early next year in Texas and Massachusetts.

It has plans for a further 5,500MW of capacity, mainly in Texas and New York, but has decided to stay out of California, where the response to rocketing wholesale power prices, by both the regulator and the industry, has been "hysterical".

Mr Giller thinks more European chief executives should follow his example by aligning themselves more closely with the risks of business and dispensing with the perks.

"I live a very normal life and what we are doing here shouldn't be unusual. Every company should be doing this," he says.