The average total earnings of FTSE 100 chief executives have more than doubled over the last five years to a record £3.2m, according to a report published today.
The chief executives of FTSE 250 companies are also benefiting – their pay has increased by more than 90 per cent since 2001/2. Over the same period, however, average earnings of full-time employees have increased by around 20 per cent, from £25,000 to £30,000.
The rise in executive pay has been driven largely by higher incentive payments, according to the Directors' Pay Report 2007 published by Incomes Data Services (IDS). Seven years ago, just a quarter of senior FTSE 100 executives received long-term incentive payments. However, this figure has now almost doubled.
Of the £3.2m the average FTSE 100 chief executive is now taking home each year, just 23 per cent is accounted for by their annual salary. The remainder is in bonus and incentive payments.
Unions criticised the huge pay awards and said they contributed to a widening in the gap between Britain's rich and poor.
TUC General Secretary Brendan Barber, said: "Britain's top directors clearly have no shame. Year in, year out they have been paying themselves far bigger rises than they are prepared to pay their staff while lecturing the rest of us on the need for low taxes. It beggars belief that they are somehow working twice as hard as five years ago."
A recent poll of pay experts carried out by IDS found that more than half thought that executive directors of public companies were overpaid while two-thirds thought that pay differentials between the executive board and the rest of the workforce were too wide.
The report shows that FTSE 350 directors' salary increases also outpaced those received by shopfloor employees. Over the last year, the salaries of top directors went up by an average 9.3 per cent, while IDS Pay Databank figures show wage settlements across the economy as a whole were running at 3.5 per cent over a similar period.
Eight executives in the FTSE 350 were revealed to have received total remuneration in excess of £10m over the last year, with the highest package – awarded to Bob Diamond of Barclays – coming in at a massive £22m.
Steve Tatton, editor of the IDS Executive Compensation Review and one of the report's authors, said: "It is time the rest of us gave a big raspberry to all their hand-wringing excuses of needing the incentives and matching the international going rate. This is not just morally offensive greed, it is bad for the rest of society, too. The growth of a new class of the super-rich, semi-detached from the rest of society, hits social cohesion, feeds into house price inflation and harms staff loyalty and commitment."
The report names and shames construction group Morgan Sindall as one of the worst offenders, highlighting that four of its directors received pay increases of between 9.6 and 29.7 per cent last year, with the overall average coming in at 19.1 per cent. The company's accounts attributed the large increases to the "significantly increased size and complexity of the group, and the need to maintain overall remuneration packages at competitive levels".Reuse content