EXECUTIVE PAY
FTSE 100 directors get 49% increase in total earnings
FTSE 100 directors’ earnings rose by an average of 49% in the last financial year, according to the latest research by Incomes Data Services. IDS says annual salaries now average £2,697,664.
These relatively lavish increases are even higher than the 43% rise in total earnings for CEOs, which “suggests that executive largesse is evenly spread across the board,” says IDS.
Total earnings is, as defined by IDS, fixed pay, salary and benefits, the value of bonuses earned during the year, both cash and deferred, plus the “crystallised‟ money value of any long term incentive plan (LTIP) awards and the nominal gains made on the exercise of any share options cashed-in during the year.
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Steve Tatton, editor of the IDS report, said: “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. The pay gap between the boardroom and the shop floor does not yet show any signs of closing.”
Bonuses and LTIPs
FTSE 100 directors saw their average bonus payments increase by 23%, from £737,624 in 2010 to £906,044 in 2011.
The increase in LTIPs and bonus payments received by FTSE 100 directors more than made up for a modest 3.2% growth in base salary that FTSE 100 directors averaged over the last year.
A final word
“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.” - Steve Tatton, editor of the IDS report.
Want to know more?
Title: IDS Directors’ Pay Report, Incomes Data Services, October 2011.
Survey details: All data in the report is taken from the latest available published annual accounts with year-end dates between February 2010 and April 2011.
Availability: To purchase a copy of the report, visit the IDS web site here.
Incomes Data Services is the “leading UK information and research service on employment issues, providing a range of publications for employers, trade unions, government departments and other agencies”. To find out more visit www.incomesdata.co.uk.
PwC responds to IDS analysis of FTSE 100 company director pay
Tom Gosling, partner at PwC, said: "Remuneration Committees are going to have to work hard to strike the right balance this year. Companies in the [recent PwC] survey identified their main challenges as maintaining overall competitiveness of pay and managing executives' expectations around pay. However, we would highlight the challenge for Remuneration Committees to demonstrate that they are acting responsibly in the context of a worsening business outlook and growing cost constraints within businesses.”
He added: "The government has announced its intention to require companies to disclose the link between pay and performance over five years as well as showing how pay for the most senior executives compares with company profits and pay of the wider workforce. Companies should bear these future disclosures in mind as they make decisions this year, and make sure they have a good story to tell."
Gosling concluded: "Throughout the recent recession, executive pay continued to rise year on year. If this continues, it will only increase the political pressure to act. Companies need to be careful that they don't create a situation where regulation is imposed upon them, with all its unintended consequences."