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Pay Increases By 49% For UK's Top Bosses

(c) Sky News 2011
 

Britain's top company directors have enjoyed a pay rise of almost 50% in the past year - taking their average earnings to almost £2.7m.

A study of FTSE 100 (Euronext: VFTSE.NX - news) companies by Incomes Data Services (IDS (KOSDAQ: 078780.KQ - news) ) showed the 49% increase, which covers salary, benefits and bonuses, was higher than the 43% seen by chief executives.

Average bonus payments for directors increased by 23% from £737,000 in 2010 to £906,000 this year, the report said.

Steve Tatton of IDS said: "Britain's economy may be struggling to return to pre-recession levels of output, but the same cannot be said of FTSE 100 directors' remuneration.

"The generous remuneration packages that FTSE 100 directors now receive indicates a marked improvement in boardroom fortunes.

"But, with closer scrutiny of boardroom pay expected in the future, remuneration committees will have to make sure that they are able to provide full and thorough justifications for the bonuses awarded.

"This means that they will have to be much more transparent about how total benefits packages are structured and how performance is measured."

The pay of FTSE 100 chief executives rose by 43% in the last financial year to an average of £3.8m, while finance directors enjoyed a 34% increase to take their average earnings over the £2m mark, according to the report.

Sir Martin Sorrell, who heads the advertsing giant WPP (LSE: WPP.L - news) and ranked sixth among top paid executives, defended remuneration increases.

He told Sky News that pay is about "both short- and long-term incentives" and helped keep Britain competitive. 

However the Prime Minister urged "responsibility exercised by everybody, including in the boardroom".

David Cameron added: "Boards have got think, when they're making pay awards 'is this the right and responsible thing to do?'.

"Of course you've got to attract the best talent to run the business that you are accountable for as a non-executive director, but is what you're doing responsible?"

Mr Tatton said the figures showed the pay gap between the boardroom and the shop floor showed no sign of closing, adding: "At a time when employees are experiencing real wage cuts and risk losing their livelihoods, without further explanation it may be difficult for FTSE 100 companies to justify the significant increase in earnings awarded to their directors."

Another IDS report said workers in the private sector received an average pay rise of 2.6% this summer.

TUC general secretary Brendan Barber said: "Boardroom (SES: B10.SI - news) pay rewards are a brazen stitch-up. Reform should start with employee representation on remuneration committees, which would give directors a much-needed sense of reality."

Labour leader, Ed Miliband, agreed.

He said: "I think its wrong because what we see is rewards not based on performance, not a something for something culture but a something for nothing culture.

"We've seen the stock market flat over the last year or so, so not more wealth being created and yet top pay going up by 50%.

"This is what we have to change about our economy so that we make sure what people get out is related to what they get in."

A Department for Business, Innovation and Skills spokesman said: "The Government has recently launched a consultation into company narrative reporting and a discussion paper on executive pay.

"Proposals being consulted on include how to strengthen the link between pay and performance and provide shareholders with clearer, more relevant information on executive remuneration."