Publish and be damned: call for transparency in executive wages

 

Companies should be forced to publish details of the pay gap between top executives and their average employee as part of a plan to tackle excessive boardroom remuneration.

The independent High Pay Commission, which is due to publish its report tomorrow, is expected to recommend a number of measures to increase transparency and reduce incentives for companies excessively to reward senior management. Sources close to the commission said these are likely to include proposals to simplify pay structures so total reward packages can't be disguised from shareholders, and also to put employees on company remuneration committees. The report will be welcomed by the Labour leader Ed Miliband, and is also likely to feed in to the Government's own policy on executive pay.

In September, the Business Department published a consultation paper which suggested giving shareholders additional information about how executive pay related to that of the rest of the workforce. It also proposed that companies should have to provide "fuller information on the relationship between pay and company performance".

Government sources privately admit they have been slow to respond to public anger about excessive executive pay in the face of wage freezes for many employees and public-sector spending cuts. They are concerned that Labour's attack on irresponsibility in the boardroom has resonated with voters and believe they need to unveil tough pay measures themselves to avoid being perceived as "on the side of the rich".

Research for the High Pay Commission has found that the average annual bonus for a director in a FTSE 100 firm has increased by 187 per cent in the past decade despite big falls in share prices. Senior executives received a bonus worth 48 per cent of salary in 2002 but last year, for the same level of performance, it had jumped to 90 per cent.

At the same time, salaries have also increased by 63 per cent while the average value of long-term incentive plans shot up by 700 per cent in the last decade.

Even state-owned banks have not been immune. Last year, directors' average total earnings were just under £4m compared with £1.7m in 2000.

In an interview with The Independent, Rachel Reeves, Labour's shadow Chief Secretary to the Treasury, said it was clear that such bonuses were unacceptable. "Bank bonuses last year were around £7bn. This year RBS is talking about bonuses of around £500m – and in general executive pay is up 49 per cent in a year. That is at a time when the value of FTSE 100 companies is falling, the value of bank shares are falling, and average earnings are going up by about 2 per cent a year if you're lucky.

"That can't be right – because it's not rewarding success. Most people don't expect something for nothing. They just don't think it's fair and they're right."

The High Pay Commission report is likely to suggest there is no evidence that executive pay has to increase at such a high rate to stop executives going abroad. Instead it will argue that such pay distorts the market by taking away talent from less well-remunerated but equally important parts of the economy.

How much? Britain's best paid bosses

1. Mick Davis, chief executive, Xstrata.

Mining giant Xstrata plc employs about 77,000 people worldwide. In a statement it said "it does not consider a ratio comparison between executive directors and non-Board employees to be a useful way of assessing the fairness and balance of Xstrata's remuneration practices".

Total pay 2010-11: £18,426,105

 

2. Bert Becht, chief executive, Reckitt Benckiser

Left-wing think-tank Compass made Becht, the man behind Cillit Bang, the FTSE's highest-paid chief executive in 2008 with pay of about £37m. The company did not respond in time to a request for further information.

Total earnings 2010-11: £17,879,000

 

3. Michael Spencer, chief executive, ICap

Icap, a brokerage company, has just reported "flat" revenue of £867m in the six months to September. Icap's biggest foreign operation, in Brazil, remained loss-making but is set to break even next year after the dismissal of 54 of 250 staff last month. The company did not respond in time to a request for further information.

Total earnings 2010-11: £13,419,619:

4. Tom Albanese, chief executive, Rio Tinto

The mining giant Rio Tinto employs about 77,000 people worldwide and has just bid £404m for the Canadian uranium producer Hathor Exploration. It said it did not have a breakdown for average earnings within the company.

Total earnings 2010-11: £11,623,162

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Sport
Adnan Januzaj and Gareth Bale
footballManchester United set to loan out Januzaj to make room for Bale - if a move for the Welshman firms up
Arts and Entertainment
Lena Headey as Cersei Lannister in Game of Thrones
film
News
i100
Sport
Yaya Sanogo, Mats Hummels, Troy Deeney and Adnan Januzaj
footballMost Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
News
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?
Finally, a diet that works: Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced

Finally, a diet that works

Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced
Say it with... lyrics: The power of song was never greater, according to our internet searches

Say it with... lyrics

The power of song was never greater, according to our internet searches
Professor Danielle George: On a mission to bring back the art of 'thinkering'

The joys of 'thinkering'

Professor Danielle George on why we have to nurture tomorrow's scientists today
Monique Roffey: The author on father figures, the nation's narcissism and New Year reflections

Monique Roffey interview

The author on father figures, the nation's narcissism and New Year reflections
Introducing my anti-heroes of 2014

Introducing my anti-heroes of 2014

Their outrageousness and originality makes the world a bit more interesting, says Ellen E Jones
DJ Taylor: Good taste? It's all a matter of timing...

Good taste? It's all a matter of timing...

It has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
Olivia Jacobs & Ben Caplan: 'Ben thought the play was called 'Christian Love'. It was 'Christie in Love' - about a necrophiliac serial killer'

How we met

Olivia Jacobs and Ben Caplan
Bill Granger recipes: Our chef's breakfasts will revitalise you in time for the New Year

Bill Granger's healthy breakfasts

Our chef's healthy recipes are perfect if you've overindulged during the festive season
Transfer guide: From Arsenal to West Ham - what does your club need in the January transfer window?

Who does your club need in the transfer window?

Most Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
The Last Word: From aliens at FA to yak’s milk in the Tour, here’s to 2015

Michael Calvin's Last Word

From aliens at FA to yak’s milk in the Tour, here’s to 2015