GettyFTSE 100 directors saw their total earnings rise by 49 per cent in the past financial year, taking the average to just under £2.7m, according to research by Incomes Data Services, the pay monitoring group.
The increase will fuel controversy over executive pay as Vince Cable, business secretary, consults on proposals to clamp down on the “escalation” of awards, including putting employees on remuneration committees and making shareholder votes binding.
In the City of London, however, bonuses are set to fall sharply as a result of market turmoil. The Centre for Economics and Business Research forecasts that this year’s total of pay-outs, due in the new year, will tumble by 38 per cent to £4.2bn.
That would take City bonuses to just over a third of the £11.6bn peak seen in 2007-08. The last time a lower level of bonuses was paid was in 2002-03.
But FTSE directors’ earnings have now soared for two years, according to IDS’s data. The latest increase follows a 55 per cent rise in 2009-10 as profits bounced back from the recession.
For chief executives in the FTSE 100, the rise over the past year was 43 per cent, taking their average to £3.86m, while finance directors received 34 per cent, taking them to £2m.
IDS’s figures are averages. If median figures are used – the halfway point between the largest and smallest rise – the increase is calculated at a more modest 16 per cent.
Nonetheless, all these figures are way above the 2.3 per cent increase in average earnings across the economy in the year to April, as well as the 4.5 per cent rise in FTSE 100 shares over that period.
Steve Tatton, editor of the report, 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.
“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 base salaries of FTSE 100 directors rose by only 3.2 per cent, but earnings were boosted by bonuses, pay-outs under long-term incentive plans and nominal gains on share options cashed in during the year.
The top earner among FTSE 350 bosses was Mick Davis, chief executive of Xstrata, the Anglo-Swiss miner, with £18.4m, followed by the top executive at Reckitt Benckiser, the consumer products group (£17.9m), Icap, the interdealer broker (£13.4m), and Tesco, the supermarket chain (£12m).
Brendan Barber, general secretary of the Trades Union Congress, said: “These bumper settlements prove that chief executive officers’ pay bears no resemblance to performance or economic reality.
“Top directors have used tough business conditions to impose real wage cuts, which have hit people’s living standards and the wider economy, but have shown no such restraint with their own pay.”
