Company chiefs' pay stretches wealth gap

Published on Friday 13 April 2007 12:27

CHIEF executives' pay is shooting up at a faster rate than inflation with annual bonuses rising even more quickly, a new study has revealed.

RREV (Research, Recommendations and Electronic Voting), a standalone commercial service wholly-owned by Institutional Shareholder Services, found salary increases for chief executives at FTSE 100 companies rose eight per cent at the median level in 2005/06, from 650,000 a year to 700,000.

But annual bonuses grew by even more, an average 39 per cent, from 450,000 to 627,000.

The news coincides with data from pay consultants Incomes Data Services which showed average pay settlements across the UK in general rose to 3.5 per cent from 3.42 per cent in the three months to the end of February.

Pay deals last hit 3.5 per cent in January, which was the highest level since September 2001. More than a quarter of the 186 pay deals surveyed came in at four per cent or more in March. IDS said that among some of the new deals struck were an average 4.75 per cent pay increase at Barclays, and 4.1 per cent at Royal Bank of Scotland, while counterpart HSBC paid an average three per cent.

Last month it emerged that in the public sector, average increases had fallen by 0.1 per cent to three per cent.

Yesterday, more than 1400 workers at Scottish company Grampian Country Foods, staged a 24-hour strike over pay, pensions and the increasing casualisation of the firm's workforce.

The RREV report also showed that remuneration rose more quickly among chief executives of FTSE-250 companies, with a 14 per cent pay rise in basic pay but a smaller increase in annual bonuses of 34 per cent.

David Paterson, research director for Rrev, said: "The total package opportunity for executives is still rising quite quickly. To be fair, company profits are also rising quite quickly and that's why we're seeing rewards going up."

Iain MacMillan, director of CBI Scotland, said: "The jobs of top executives today are more difficult than they have ever been. The pressure they are under and the skills they have to demonstrate to continue a profitable business year after year is formidable.

"All of the new laws and rules on governance have to be taken on board and we have to make sure that we pay for executives who can undertake these difficult and complex rules and compete internationally with the very best."

But Transport and General Workers Union said it would push for higher pay increases across the board in the coming year.

Tony Woodley, T&G general secretary, said: "The wealth gap is getting bigger in the UK with the rich getting richer and the poor poorer. Pay increases are still lagging way behind fat cat rewards, productivity improvements and the soaring costs of basics like food and fuel. That's why our aspirations in this year's pay rounds are going to be more ambitious.

"Not only is the retail price index inflation rising faster than for a decade, the real cost of living affecting working families, covering basics like food, fuel, housing and travel costs, is going up still faster."

IDS added it appeared that higher living costs were starting to take hold in overall wage deals. Retail price inflation, on which many pay deals are based, hit a 15-year high of 4.6 per cent in February. Ken Mulkearn, editor of IDS Pay Report, said: Higher inflation figures are pushing up pay increases under those long-term deals that are linked to the RPI."