Pay rockets for British bosses as they live the American dream

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The Independent Online

Britain's fat cats are rapidly getting fatter - and are even catching up on the corporate excesses of their US counterparts.

Britain's fat cats are rapidly getting fatter - and are even catching up on the corporate excesses of their US counterparts.

These are the conclusions of a transatlantic study on executive pay, to be presented at the annual conference of the Royal Economic Society, which takes place next week at the University of Nottingham.

The survey, by Martin Conyon of the University of Pennsylvania and Graham Sadler of Aston Business School in Birmingham, found that between 1997 and 2003 the average total remuneration of chief executives of leading UK companies rose by 77 per cent.

This was more than twice the rise in average earnings in the UK during the same period, and compared with an increase of just 5.6 per cent for top chief executives in the US.

As a result, the gap between the pay for bosses of big companies on either side of the Atlantic narrowed. In 1997, an American chief executive could expect to earn three times the pay package of his British counterpart. By 2003 this had narrowed to just 1.7 times.

The study - looking at 176 companies in the UK and 1,495 in the US - found that the average pay package of the British boss was £955,000 in 1997 and rose to £1.69m in 2003. Typically about 40 per cent of this was basic salary, with annual bonuses, long-term incentive plans and perks making up the rest. In the US, chief executives' salaries rose from £2.68m to £2.83m in the same period. They typically had more of their package made up of bonus payments: on average, only 31 per cent of the money was a basic salary.

"UK chief executive compensation is changing to more clearly match that of the US," conclude the authors.

A number of factors are behind this. The increasingly international market for management talent, the weakening of the dollar, and closer scrutiny of US executives following the Enron and WorldCom scandals are all relevant.

The authors also note that, in another study, it was found that the pay of executives headhunted into a company tends to be higher than the pay of those promoted internally.

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