Executive pay ‘sky high’
British executives are earning an average of 18.1 per cent more than last year, according to a report out today.
A survey of FTSE 350 directors shows that nearly half of the executives have earned more than £1 million this year, with eight of them receiving total salary packages topping £5 million.
The analysis of salaries, annual bonus payments, long-term incentive plans and benefits of nearly 1,500 executive directors in Britain also shows that average total earnings of FTSE 100 lead executives rose above £2 million for the year ending June 2005 for the first time.
More than 85 per cent of the FTSE 100 lead executives who had completed a year in their current post earned over £1 million.
Research company Incomes Data Services (IDS) claims that the average pay increase over the year for the country as a whole, excluding directors, was between three and 3.5 per cent.
Incentives for executives as a proportion of total earnings packages rose over the year to June, with more top directors being given long-term incentive plan (LTIP) awards and exercising more share options than the previous 12 months. The highest incentive payment in the FTSE 350 was worth a total of £10 million.
“Incentive scheme maximum payments have been steadily rising with the result that potential payments have got bigger,” Steve Tatton, editor of the IDS Executive Compensation Review, said.
The 18.1 per cent pay rise for the country’s top directors is the highest since the company began monitoring executive pay 15 years ago.
However, the TUC has criticised directors over the figures, insisting that the pay rises are disproportionate and inappropriate.
General secretary Brendan Barber said: “The sky high increases of top executive pay show no sign of slowing. Whilst ordinary workers are happy to accept pay rises in the region of 3.5 per cent, the bosses of the UK’s top 350 companies are rewarding themselves pay packets that are almost six times bigger.
“Some shareholders are trying to keep a lid on executive pay, but these figures suggest that remuneration committees are still finding ways of inflating the overall reward package.”
Meanwhile, a separate report into executive pay finds that women executives are still being paid far less than their male counterparts.
The Institute of Directors (IoD) and Croner Reward survey reveals that, despite an increase in the number of female executives, women bosses still earn on average 25 per cent less then men.
Across companies of all sizes female directors earn an average of £55,000 per year compared with the average male executive’s basic pay of £72,100.
Financial service companies are the worst offenders for pay inequality with an average gender pay gap of 35 per cent, while the public sector has the smallest, at seven per cent.
IoD director general Miles Templeman said: “Although we are, fortunately, seeing more and more women reaching board level within organisations, the rewards of accomplishing that feat are still being distributed unevenly.
“If the jobs are the same clearly the pay should be equal.”
The Equal Opportunities Commission has called for a new balance of responsibilities “to ensure employers take proactive steps to close pay gaps in the interests of a diverse and productive workforce”.
