UK's bosses quids-in despite the woes

The UK's biggest bosses are getting above-inflation pay rises and fat bonuses to compensate for the recession pay freeze. You have to admire the audacity...

by Dave Waller
Last Updated: 10 Nov 2011
According to Deloitte, the main board directors in FTSE 100 companies are set for pay rises of between 2.5% and a whopping 7.5% in 2011, before bonuses, with a median of 4%, while FTSE 250 rises average 3%.So despite all the clamouring for a more reasonable and responsible approach to remuneration, as well as greater transparency, one thing seems abundantly clear: that bosses’ pay follows an entirely different logic to that of their underlings.

Indeed, while directors are getting all that, the average private sector pay rise was 2.5% in August, according to analyst Incomes Data Services. Given that inflation hit 4.4% in July, that’s hardly something to bust open the bubbly about.

Things are different at the other end. Yes there have been some positive moves to rein things in - retention of shares and the increase in clawback provisions, for example. And returning to pay rises at some point after a freeze seems only fair. But it also appears out of whack to dole out such a generous slice at a time when fairness in society and the sustainability of our current model comes under a level of scrutiny that hasn’t been seen for 30 years.

Indeed, the timing couldn’t really be worse. The Institute for Fiscal Studies has just come out saying that the impact of the crisis on living standards has ‘only just begun to be felt’, and predicting a 3.5% fall in typical household income in the year to April – the steepest fall since 1981.

Which just makes events at the other end of the ladder that much more difficult to justify. Bonus payouts rose from 71% of maximum in 2010 to 87% in 2011 for the 100 largest firms. For the FTSE 250, bonuses leapt from 54% of maximum to 86%. And so we have the situation where many directors can get away with delivering a mediocre performance and still wind up almost doubling their salaries. Research by Thomson Reuters Datastream found that one in five FTSE 100 companies paid their chief exec more last year than they forked out in UK corporation tax.

Of course, the Government has twigged on to this and is exploring executive pay mechanisms, with its proposals due before Christmas. There’ll be a lot of interest further down the ladder there. Deloitte’s suggestion is to get companies doing more to link executive pay with performance. How much did they get paid to think up that revolutionary idea?


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