The chief executives of the country's largest public companies saw their pay rise by more than a third last year, far faster than most wages across the nat-ion, according to a report.
The CEOs of Britain's 30 richest companies – those with a market value of more than £10bn – received pay rises of 33 per cent, at the same time as increasing numbers of British people struggle to cope with the effects of the credit crunch.
The survey, which provides an insight into the true earnings of Britain's high-powered executives, was carried out by the remuneration consultancy MM&K and the proxy voting agency Manifest, and took into account performance-related bonuses and rewards as well as salaries. It found that the average pay of many top executives had risen to a staggering £5m, and had climbed at 10 times the level of inflation in the course of a year.
The report also said that top directors "did significantly better than shareholders and employees", revealing that CEOs working for the biggest businesses earned around 60 per cent more than the second highest earning director at their establishment.
Those who worked for smaller companies also received pay rises but these were far more modest. In 2007, the average CEO of a FTSE 100 company enjoyed a salary of £755,000 and an annual bonus of £828,000. The same people were also awarded "long-term incentives" – money based on their performance over a three- to five-year period – with an estimated value of £1.6m. This would suggest that as the effects of the credit crunch are felt around the country, more top companies have started to favour incentive-based rewards over swollen salaries.
The report concluded: "In terms of pay, size matters. Bigger companies have bigger salaries, bigger bon-uses, much bigger long-term incentives and bigger pensions. Added together, this gives them much bigger total remuneration."
The pay increases, which appear to be a desperate attempt by some companies to convince their top executives to remain in their jobs during a time of economic uncertainty, are not expected to continue forever. Nigel Mills, a director at MM&K, admitted that if a similar report was published next year it would paint a very different picture.
"A lot of these big awards would have been made during 2007 when the signs of economic downturn were not fully evident," he said. "But those that were made towards the end of the year might have been at a time when the share prices of these companies had already started to drop off.
"It's partly in connection with what's happening in the United States, but it's also about providing incentives to the executives to drive the businesses forward. I can't believe it can go on, and the evidence seems to be suggesting that in this current year [the companies] are not managing to push through any further increases."
According to the survey, the highest earning executive in 2007 was Bart Becht of the cleaning and healthcare company Reckitt Ben-ckiser. Although his £912,000 salary was not the highest – Jeroen van der Veer of Royal Dutch Shell took home £1.3m – he received a cash bonus of more than £3.2m and a £271,000 pension. A spokeswoman for Reckitt Benckiser said: "It's all about pay for results and the results have been stunning. Our CEO is paid for his performance, and this business has constantly delivered good results to the benefit of our shareholders."
* The Royal Mail, under attack for closing 2,500 post offices, has been accused of rewarding its bosses for "failure" after it was revealed chief executive, Adam Crozier, received more than £3m in pay, pensions and incentives in the last financial year.
The best-paid CEOs
*Bart Becht, Reckitt Benckiser: £22,357,500
Born and raised in the Netherlands, Becht has converted his company into one of the most successful manufacturers of cleaning products. With an MBA from the University of Chicago, he made swift progress through Procter & Gamble before joining Benckiser in 1988. Oversaw the acquisition of Boots Healthcare International for £1.9bn in 2006.
*Michael Davis, Xstrata: £16,113,022
Better known as Mick, the 50-year-old worked for several years in the utilities industry in South Africa, before progressing to BHP Billiton, the mining giant. Xstrata was a relatively little known Swiss mining company when Davis joined as chief executive, but a £1.8bn deal to buy coal mines in South Africa took him into the big-time.
*Mike Turner, BAE Systems: £9,035,980
A young manager of the year award from the British Institute of Management in 1973 signalled early promise. He has spent nearly four decades working in the aeronautical industry, much of it overseeing British Aerospace's Military Aircraft Division, and took up his current post in March 2002. He was awarded a CBE in 1999.
*Frederick Goodwin, Royal Bank of Scotland: £8,852,818
Born in Paisley and educated at Paisley Grammar School, Goodwin was a chartered accountant with Touche Ross before taking a role at BCCI in 1990. Nicknamed Fred the Shred because of his penchant for efficiency savings, he joined RBS as deputy CEO in 1998 and rose to CEO three years later.