Top bosses’ pay soars 50 per cent in a year

Average earnings among directors in FTSE 100 companies rose to just under £2.7 million according to research by Incomes Data Services (IDS) released today.

The increase of 49 per cent – which covers salary, benefits and bonuses – was higher than the 43 per cent jump in the pay of chief executives. Average bonus payments for directors increased by 23 per cent from £737,000 in 2010 to £906,000 this year, the report states.

The figures come as a senior Bank of England policymaker warned reports from the retail sector suggested the economy had already begun to contract.

Paul Fisher, of the Bank’s monetary policy committee, said the economy had suffered a poor third quarter and looked unlikely to pick up in the last three months of the year, placing it in real danger of sinking into its second recession in three years.

His comments mirror those of another MPC member, Martin Weale, who said it was likely growth had already evaporated and the economy was contracting.

David Watt, executive director for the Institute of Directors in Scotland, queried the figures, saying he thought a few extremely high paid individuals were skewing the picture. But he said it was impossible to defend “sky-high pay for no result”. Steve Tatton of IDS 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.

“The generous remuneration packages that FTSE 100 directors now receive indicates a marked improvement in boardroom fortunes.

“But with closer scrutiny of boardroom pay expected in the future, remuneration committees will have to make sure that they are able to provide full and thorough justifications for the bonuses awarded.”

He added: “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.”

IDS has not released the names of the highest-earning directors.

Last night, a Labour party spokesman said: “These figures show that company directors have no learned the lessons of the financial crisis, and this is not a time for high earners keeping their snouts in the trough, while many people in the public sector are facing pay freezes.”

TUC general secretary Brendan Barber was equally critical: “With the FTSE 100 down on last year and most staff getting pay rises of less than 2 per cent, 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. Boardroom pay rewards are a brazen stitch-up.

“Reform should start with employee representation on remuneration committees, which would give directors a much-needed sense of reality.”

Paul Kenny, general secretary of the GMB union, said: “This is another shining example of how the elite greedy pigs who run our top companies behave.

“This is in stark contrast with what has happened to average earnings for workers in 294 occupations that cover 90 per cent of the UK workforce that have seen drops in living standards of up to 20 per cent.

However, Mr Watt added: “The sky- high wages we hear about are not real in Scottish terms. The IOD has long had a belief that the stakeholders and the shareholders should be very actively ensuring that the directors are awarded in line with the company.

“It’s for them to put on the reins where the reins are necessary.”

Tom Powdrill, of Pensions Investment Research Consultant, which advises shareholders and has often advised them to fight against excessive pay for directors, called for reform of pay awards. “I think if there isn’t a sufficient restraining force, then some companies will just push the envelope,” he said.

“They would all argue that they’re working in a competitive market place and need to pay top whack to get the best talent, but it’s surprising that there isn’t a greater appreciation that during these difficult times, when people fear losing their jobs and facing pay freezes, it does seem like a lack of sensitivity.”

Reacting to the figures last night, a Scottish Government spokeswoman said: “We believe that restraint is appropriate in tough economic times, and Scottish ministers have set an example by taking a pay freeze for three years running.”

Mr Powdrill said that shareholders were in a difficult position in trying to restrain pay levels as often it was presented at meetings as a done deal. He said, however, that reform at a corporate level was needed.

“If companies are pushing up the pay awarded to directors, then we need to look at reform of remuneration committees, and the inclusion of shareholders and employees on them. Rather than tackle the issue during meetings, it needs to be looked at further up-stream.”

A spokesman for the UK Department for Business, Innovation and Skills said of the figures: “The government has recently launched a consultation into company narrative reporting and a discussion paper on executive pay.

“Proposals being consulted on include how to strengthen the link between pay and performance and provide shareholders with clearer, more relevant information on executive remuneration.”

The Treasury is already proposing as part of Project Merlin, deal signed up to by the six big banks, which covers lending, bonuses and transparency, that executives pay packages to how much their institutions loan. But while corporates continued to resist pressure from government and shareholders to reduce pay levels, another report showed that recession has taken a large bite out of bonuses paid out to City bankers, reducing them to levels not seen since 2002.

The Centre for Economics and Business Research think tank predicted that total bonus payouts in the City for 2011-12 are expected to fall year on year by 38 per cent – to “only” £4.2 billion.

This takes the level of bonus payments to just over a third of the £11.6bn peak seen in 2007-08 just before the recession.