Directors in the UK's top firms have seen their pay rise by almost 50% in the past year, taking their average earnings to just under £2.7m, a new study revealed today.
Research by Incomes Data Services (IDS) among directors in FTSE 100 companies showed that their 49% increase – which covers salary, benefits and bonuses – was higher than the 43% jump in the pay of chief executives.
Average bonus payments for directors increased by 23% from £737,000 in 2010 to £906,000 this year, said today’s report.
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.
“This means that they will have to be much more transparent about how total benefits packages are structured and how performance is measured.”
The pay of FTSE 100 chief executives rose by 43% in the last financial year to an average of £3.8 million, while finance directors enjoyed a 34% increase to take their average earnings over the £2 million mark, according to the report.
Mr Tatton said the figures showed that the pay gap between the boardroom and the shop floor showed no sign of closing, adding: “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.”
TUC general secretary Brendan Barber said: “With the FTSE 100 down on last year and most staff getting pay rises of less than 2%, 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% of the UK workforce that have seen drops in living standards of up to 20%.
“The fall in living standards for the majority means that the Government’s strategy for an economic recovery is in tatters as two thirds of the economy is consumer driven. George Osborne must be the only person who does not get it.”
A Department for Business spokesman said: “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.”