Bosses of companies in Britain’s FTSE 100 index have enjoyed a 14 per cent boost in total pay, despite rises still lagging behind inflation for the majority of workers in this country, a report today reveals.
The rise was fuelled by a 58 per cent surge in share-based “long term incentive payments” (LTIP), which have been criticised as overly complex and hard for investors to value when details are published in annual reports.
The report, published by Income Data Services, says that company bosses’ basic pay rises were relatively restrained at 4 per cent, pushing the median payment to £568,500, while annual cash bonuses actually fell by 8.8 per cent to £553,200. But the share-based “long term” payments more than made up for that decline. The median LTIP award for FTSE 100 directors increased to £1.2m, from £764,000. The report gets its figures from annual reports published between June 2012 and May 2013.
The Office for National Statistics said last week that total pay, including bonuses, across the labour market grew by 0.7 per cent in the three months to September 2013 compared with a year earlier. The 14 per cent rise in total earnings for FTSE 100 directors is, therefore, 20 times the rate of pay growth for most workers.
“Britain’s top bosses are back to their old tricks as their pay is growing 20 times faster than the average worker,” said TUC general secretary Frances O’Grady. “It’s one thing replacing bonuses with long-term incentive plans, but FTSE 100 companies are simply exploiting this change to make their fat cats even fatter.”
Steve Tatton, the pay report’s editor, noted that the sharp increase in total pay came despite last year’s “shareholder spring” which saw an unprecedented level of shareholder activism and resulted in the departure of executives including Andrew Moss at Aviva and David Brennan at AstraZeneca in the midst of pay controversies. Mr Tatton said the opacity of executive pay packages could be to blame.
“The vesting of large share awards is currently less visible to investors than salary increases and bonus pay-outs,” he said.
That may change with the introduction of a new requirement to include a single total pay figure for top executives following the introduction of new reporting rules last month. These could make the scale of long-term incentive payments much more obvious than at present.
Most listed companies’ annual accounts do not include vested share awards in the main “emoluments” table detailing directors’ pay. As such their value often has to be calculated from separately published information.
Shareholders are also set to get a binding vote on companies’ pay policy in addition to the current advisory vote on remuneration report.
Last week The Independent reported that investors had inflicted 65 defeats on US companies as part of the “say on pay” rules that give them a voice on executive remuneration. By contrast, there have been only 2 defeats in Britain this year, the lowest level since 2010.