FTSE 100 chief executives have received inflation-busting pay rises averaging 7.4 per cent over the past year, almost making up for a 29 per cent drop in their bonuses, according to a report published Monday.
Incomes Data Services, the pay research group, said company chiefs’ salaries were growing twice as fast as the pay of shop-floor workers.
Related article: Pay boon for FTSE firm chiefs as salaries and bonuses remain high despite economic crisis (Daily Mail)
Their total remuneration fell just 1.5 per cent in spite of collapsing profits in one of the deepest postwar recessions, it said. Chief executives were still earning, on average, as much as in 2006, when the economy was booming.
The findings come at a sensitive time after Richard Lambert, CBI director-general, warned last week that high levels of executive pay were an important factor in the “severe knock” business had taken to its reputation. Demands are growing for reform, including tougher guidelines for compensation committees, following investor unrest at companies such as Royal Dutch Shell and Royal Bank of Scotland.
IDS said median bonus payments to FTSE 100 chiefs fell from £707,000 in 2007-08 to £502,000 in 2008-09.
“Some shareholders may question whether bonus schemes structured so that they still typically pay out over £500,000 during the shredding of profits in one of the deepest recessions since the second world war are sufficiently challenging to CEOs,” it said.
As bonuses dipped, chief executives received salary increases several times the rate of inflation. IDS said that the focus on bonus payments had allowed salary increases to “slip under the radar”.
“In previous downturns growth in bonuses slowed, but for bonuses to shrink, and almost by a third, is highly unusual,” said Steve Tatton, editor of IDS’s Directors’ Pay Report.
“But what is also surprising is that the credit crunch . . . has had so little impact on the rate at which chief executives’ salaries are rising.”
Chief executives of FTSE 100 construction and building materials companies received the largest salary increases, averaging 12.8 per cent, even though the sector was among the hardest hit by the recession.
Across the whole FTSE 350, bonus payments for chief executives were down 31 per cent, from £412,000 to £283,000. Salaries were up 6.6 per cent.
26 Oct 2009 12:08am
By Brian Groom, Business and Employment Editor
Source: The Financial Times