The economic crisis has had little effect on the pay of top executives of FTSE 100 companies in Britain, who saw their median pay increase by 32 per cent in the last year to an average of £3.5m.
During the same period, average earnings across the UK rose by 2 per cent – half the rate of inflation – meaning an effective pay cut for most. A report by the consultancy firm MM&K and the corporate governance specialists Manifest found the pay of executives in Britain had little relation to performance or shareholder value. The increase was more than treble the 9 per cent rise in the FTSE 100 share index over the same period.
The increase means that the executives of FTSE 100 companies earn more than 150 times the average wage in Britain.
The top earner named in the report was Michael Spencer, chief executive of UK-based inter-dealer money broker Icap, who took home £23.7m in salary and bonuses. Michael Davis, of the mining company Xstrata, took home £21.2m and Bart Becht of the consumer goods group Reckitt Benckiser received £17.7m.
Brendan Barber, general secretary of the Trades Union Congress said: "These figures prove that directors' pay arrangements bear little resemblance to economic reality. Despite mediocre performance, corporate Britain continues to enjoy lavish and risk-free awards.
"As senior executives grab an ever-greater slice of Britain's dwindling earnings pool, ordinary workers face having their wages held back – with alarming consequences for consumer spending, household debt and the strength of our economic recovery," he added.
A recent report by the High Pay Commission found the top 1,000th of the working population gets 5 per cent of the country's earnings, a ratio similar to that in the 1940s.
The study accused businesses and governments of having "failed to tackle the dramatic growth in pay at the top".
Also this month, the Business Secretary, Vince Cable, launched a consultation on corporate governance and executive pay, the results of which will be published in June. Responding to the High Pay Commission's report, he said: "What is impossible to justify is the fact that differentials of income at the top end continue to increase.
"Clearly something needs to be done to strengthen shareholder responsibility in this area, because at the moment they're either abdicating it or not exerting it."
The findings revealed in this latest report echo those found in a Government-commissioned report into public sector pay led by Will Hutton in October last year.
The Fair Pay Review recommended a cap on directors' pay at a multiple of staff wages to stop the "arms race" in executive compensation.
Mr Hutton noted: "There is evidence that the link between compensation and performance is weak."
"There is a collective action problem, with every firm feeling obliged to pay the going, and rising, rate for executives.
"When all firms pay above the average, pay can only spiral upwards," he said in the report.Reuse content