Ministers defied as directors' incomes soar further ahead

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The Independent Online
THE MASSIVE gap between boardroom pay and the wages of employees has continued to grow, despite constant ministerial calls for restraint.

Directors are now enjoying average increases of 10.2 per cent compared with the 4 per cent growth in earnings elsewhere, barely ahead of the inflation rate.

The latest survey of earnings by the Institute of Management, which shows that even after inflation directors were 6.9 per cent better off, could resurrect government plans to enforce boardroom moderation.

The 10.2 per cent rise enjoyed by directors in the year to January compares with 7.9 per cent in the previous year. Researchers found that the typical director now earns pounds 93,787 a year, with 27 per cent receiving more than pounds 100,000 and 3 per cent pounds 250,000 plus.

The highest pay is enjoyed by directors involved in insurance and pensions who are on pounds 102,154, a rise of 13.2 per cent. They were closely followed by boardroom finance specialists on an average pounds 101,780 and general management administration directors on pounds 101,575.

The 1998 National Management Salary Survey, published by the Institute and Remuneration Economics, shows that the significance of bonus payments has increased. Additional lump sums now account for 17 per cent of executive pay generally, up from 15.7 per cent in 1997 and 12.8 per cent in 1995.

Roger Young, director of the Institute, said the "bonus culture" had steadily grown in British companies. "Pay is now linked to profits and performance," he said. "While Gordon Brown is right to warn about wage- related inflation, management pay increases are an indication of the success of Britain's companies and the competitiveness of UK plc."

Union leaders, however, are constantly reminding ministers that while directors and managers see their remuneration increase in line with profitability and share performance, little of that trickles down to the shop floor. Pressure on the Government to revisit the issue of "fat cat" pay awards is increasing.

The report, based on a study of nearly 26,000 individuals in 584 organisations, shows that executive pay generally is up by 7.2 per cent compared with the previous year's 6.4 per cent and managers' earnings have risen by 6.9 per cent, up from 6.2 per cent. The survey shows that redundancies at 1.3 per cent were at their lowest level for 10 years, while 24.5 per cent of companies were experiencing recruitment problems, the highest level since 1990.

It was found that the average manager is 42 years old, earns pounds 36,196 and has been at the organisation for an unexpectedly long period of 15 years. The average director is 48, earns pounds 93,787 and has been with the organisation for a similar period.

Some 65 per cent of managers earn more than pounds 30,000 a year and 29 per cent over pounds 40,000.

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