Pay gap grows in fat cat Britain

New study of top companies reveals that many of the highest-flying directors have the worst-paid employees
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The Independent Online

The highest-paid directors of some of the UK's leading companies receive more than 200 times the average earnings of their workers, according to a new study.

The highest-paid directors of some of the UK's leading companies receive more than 200 times the average earnings of their workers, according to a new study.

The research into the "fat cats" whose pay packets underline the growing gap between rich and poor in Britain is not the work of some radical think-tank but a group of accountants based at the University of Essex - the Association for Accountancy and Business Affairs. Its league table of 1,200 quoted companies shows that some of the lowest-paid employees work for the best remunerated bosses. Many of the firms have large numbers of part-time workers.

Among the study's "top ten" is Jim Hodkinson, chief executive of the New Look fashion chain, who received just over £1m from his company in 1998-99. Its average employee received £6,400 - one-156th of what Mr Hodkinson got. Earlier this year it emerged that Mr Hodkinson was also receiving a pension of £182,000 from his former employer, Kingfisher, and had received a Mercedes worth £35,000 as part of his termination package.

In September, The Independent on Sunday interviewed "Mina", a homeworker in Leicester who was sewing labels on to New Look tops. Mina was proud that even at 2p per label she was fast enough to make the £3.60 per hour minimum wage. Mina did not deal with New Look directly, but with a middle-man.

"I have been working for the last 10 years on the same rate. I used to get 2p for sewing on a button, but now that has been cut to 1.1p," she said. "They are reducing the piecework rates to match the new legal minimum."

Kingfisher's chief executive, Sir Geoff Mulcahy, also did well last year. He earned £2,062,000 while his average worker earned £7,600. His pay amounted to 268 times theirs.

Other companies whose "fat cat" directors earned vast sums in comparison with their employees included the EMI Group, where the then president of EMI Music, Jim Fifield, earned £6,728,000. The average employee of EMI group earned £32,570, making the US-based Mr Fifield's pay 206 times theirs.

Firms whose employees were mainly based in developing countries had particularly large gaps between the average and highest pay.

At Lonmin, the platinum and coal mining division of the old Lonhro group, the chief executive Nick Morrell was paid £630,000, while his average worker earned £3,120. Most of the firm's employees are miners in Southern Africa.

Prem Sikka, professor of accounting at the University of Essex and one of the report's three authors, said the study showed how the rich were getting richer and the poor poorer.

"The Government has no policy to ensure that the employees who generate wealth actually get an equitable share of that wealth, he said. "The question is: 'How are they going to tackle this?'"

A spokeswoman for the Confederation of British Industry said all directors and employees should be paid on the basis of merit. "We believe pay should reflect performance, from the shop floor to the boardroom," she said.

EMI said Mr Fifield, who had now left the company, was paid to reflect the fact that he was based in the US. "We operate an entertainment company and the salaries of these kinds of executives reflect what these people earn in the US," he said. "It was significantly higher than the then Chairman Sir Colin Southgate."

Bass, whose Chairman Sir Ian Prosser received £1.6m compared with an average of £9,700, said his basic pay of £914,000 was supplemented by a long-term incentive payment of £717,000.

At Lonmin, Nick Morrell's salary of £450,000 was supplemented by bonuses. David Gruber, chief executive of the MEPC property company, received a salary of just £208,000 but had total pay of

Bosses who soar in the income stratosphere

SIR CLIVE THOMPSON

Chief executive of Rentokil Initial

Sir Clive, who is president of the CBI, is known as "Mr 20 per cent" because of a promise that his profits would grow by a fifth each year. He is also famed for his sense of humour: while sitting next to the Prime Minister at the CBI's annual dinner, he referred to dealing with union recognition as "pest control".

SIR GEOFF MULCAHY

Chief executive of Kingfisher plc

SIR Geoff loves sailing, and one of his two yachts recently came third in the Swan World Championships at the luxurious Porto Cervo in Sardinia, where it is "a lot easier to buy a fur coat than a pint of milk", according to one regular. His winnings included a Rolex watch.

NICK MORRELL

Chief executive of Lonmin

After years in newspapers, latterly as commercial director of the Observer , the 52-year-old Mr Morrell knows the power of publicity. And he hates it. Thus, little is known about his personal life. He collaborated with Tiny Rowland on the famous mid-week Observer which attacked Mohamed Al Fayed. "He showed guts - I liked him," Mr Rowland said later.

JIM FIFIELD

Former president and chief executive officer of EMI Music

When Mr Fifield fell out with EMI in March 1998, he walked away with a "golden parachute" of around £12m. His job at the company involved overseeing a roster of artists including The Verve and the Spice Girls. He is known as "Lucky Jim".

JIM HODKINSON

Chief executive of New Look

On top of the £1,005,000 he received from the fashion chain last year, Mr Hodkinson receives a pension of £182,000 a year from his former employer, Kingfisher. After 25 years at Kingfisher he left with his company Mercedes, valued at £35,000.

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