Rich executives get richer as pay gap widens

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The Independent Online
THE earnings gap between 'richer' and 'poorer' British company executives is widening, according to a study published yesterday.

The UK Board of Directors Study by Korn/Ferry International, the executive search group, showed that, among executives carrying out similar roles in companies of comparable size, the better paid generally received bigger increases.

Michael Brandon, author of the 14th annual report, said: 'The rich are getting richer and the poor are getting poorer. People at the top are getting large increases and the people at the bottom are getting nothing.'

The widening gap was a result of the strong bargaining power of certain executives, he said. They were able to charge large amounts for their services on the basis that the company's share price would fall if they left.

The report also showed that many executives were receiving pay rises well above the rate of inflation, although increases were generally lower than in the previous year. Median increases ranged from 4 per cent to 8 per cent.

The top 10 per cent of executives in Britain's biggest companies had base salaries of nearly pounds 600,000, with bonuses and other payments taking the total to pounds 1.01m.

By contrast, the best-paid senior executives in smaller listed companies had salaries of pounds 136,500, rising to nearly pounds 150,000 with bonuses and other payments.

With 80 per cent of firms having performance-related bonus schemes, executive pay was increasingly dependent on a company's success, he said.

Fifty-two per cent of the Times 1,000 companies surveyed reported an increase in profits, compared with 41 per cent in the previous year. But more than two-thirds had reduced their workforces, with half expecting further cuts this year.

In addition, 85 per cent of listed companies, compared with 75 per cent last time, have complied with the Cadbury report recommendation that the chairman and chief executive roles should be split.