Boardroom pay has leapt 55%. Photograph: Martin Argles
Britain’s bosses have been accused of greed and ignoring economic reality after boardroom pay leapt by 55% over the last year.
FTSE 100 directors saw their total earnings soar in the 12 months to June, thanks to sharp rises in bonuses and performance-related pay. The average FTSE 100 chief executive now earns £4.9m a year, or almost 200 times the average wage.
Unions reacted angrily to the report today. “Don’t they know that this is meant to be austerity Britain?” said TUC general secretary Brendan Barber.
“These mega-pay rises blow away any claim that we are all in this together. While the poor and those on middle incomes lose out from cuts and pay squeezes, top directors continue to take home telephone number salaries without being overly troubled by tax,” Barber added.
He called on shareholders and the government to get a tighter grip on executive pay, at a time when ordinary workers have seen their pay kept in check by the economic downturn.
The report was welcomed by business secretary Vince Cable, who announced a review of corporate behaviour and pay earlier this week. He said it was time for executive pay to “come back down to earth”.
“We have to question whether it is linked closely enough to company performance. I’m determined to take a really close look at these important issues and want to see a wide response from industry to my review,” Cable said.
Incomes Data Services, who conducted the research, said bonuses paid to directors of FTSE 100 companies increased by 34%, while basic pay rose by 3.6%. The amount of money waiting to be disgorged from long-term incentive schemes soared by 73%, to a total of £259m, and share option gains leapt by 90%.
The FTSE 100 rose by less than a fifth over the same period.
Steve Tatton of IDS said the report suggested that companies returned to “business as usual” once the recession ended.
“It seems the days of earnings restraint were short-lived. It is as though the recession never happened,” Tatton warned.
“This time last year a number of companies actually reduced their bonus ceilings. Twelve months later it appears as if these measures have been reversed, with around 40 companies reporting higher bonus scheme maxima,” he added.
Bart Becht, who runs consumer goods giant Reckitt Benckiser, was the most highly paid FTSE 100 chief executive. He made £90m last year. IDS also calculated that Tony Pidgley of Berkeley Group enjoyed total earnings of £38.4m, followed by Mick Davis of Xstrata with £26.9m. All three benefited from share options granted in previous years. Paul Kenny, general secretary of the GMB union, said “boardroom greed is alive and well”, adding that several FTSE CEOs have come out in support of the coalition government’s deficit-reduction plans.
“Let us not forget that these are the same people urging the Government to make deep cuts in jobs and services and in the welfare on which the poorest in our society rely,” Kenny said.
In calculating total earnings IDS includes a range of payments and benefits, including the notional and actual value of share option gains, and the total cash value of long-term incentive plans.
A year ago, IDS’s report found that total earnings among FTSE 100 CEOs fell by 1.5% between June 2008 and 2009, in the teeth of the recession. However, a 7.4% rise in basic pay cushioned bosses from the impact of the downturn.
Several of Britain’s biggest companies faced shareholder anger this year over their executive pay awards. Tesco suffered one of the biggest revolts in years when nearly half its investors failed to back its remuneration policy.
Marks & Spencer was criticised for giving its new chief executive a £15m deal, while J Sainsbury had to defend a 60% rise in CEO Justin King’s total earnings, which jumped to £8m.