Executives' pay is finally slowing, study reveals

Bosses' salaries are set to remain static throughout 2010 as executives lead the way on pay restraint for the first time, a study by the pay consultancy Watson Wyatt has found.

Sue Bartlett, senior executive reward consultant, said that directors' pay was increasing at a slower or equal rate to that of ordinary workers. The survey tracked the earnings of 5,200 executives at 150 major companies and was carried out in July. It found that only finance directors – who have been in high demand during the downturn – are receiving rises, which are averaging 2.9 per cent. The median increase for chief executives and other directors is zero, compared to 2 per cent for employees generally.

"This is the first time we have really seen executives leading from the front on the issue of pay," Ms Bartlett said. "Salaries will remain frozen in 2010."

The data contradicts recent studies which have suggested that executive pay was rising in the early part of the recession. But Ms Bartlett said previous surveys have looked at information in annual reports which usually gives information up to the end of 2008 and in which pay rises had been agreed before the worst of the downturn.

The study also found that bonus payments are starting to fall. For chief executives the median bonus paid this year has been 29 per cent of salary compared with 61 per cent in the previous year. Payouts are increasingly deferred and being paid in shares.

"We are seeing a much closer correlation between the performance of companies and the compensation executives are receiving," Ms Bartlett said."This year the median salary increase for employees below management level was higher than for executives, and the increases awarded to executives and others were lower than had been budgeted in the previous year."