Even during a period of economic stagnation company bosses are being rewarded with huge pay hikes
Pay for directors at FTSE 100 companies rose by about 50% last year, according to research company Income Data Service. This amounts to, over the year, a hike of £2.7m per director.
The rise covers salary, benefits and bonuses and is even higher than the 43% rise in total earnings witnessed by CEOs.
Base salaries only rose by 3.2% while bonus payments on average rose by 23% from £737,000 in 2010 to £906,000 this year. Finance directors specifically received an average increase on their bonus of 34.1%, all the other directors an average of 66.5%.
All this during a period when the British economy has been flatlining.
Employment engagement specialist, Alan Crozier said: “Senior executives are in danger of becoming (or have already become) totally removed from reality.
“People aren’t stupid: in this scenario they feel they are being used and abused. They become cynical, distrusting, and morale drops at a time when it needs to remain high.
“When trust goes so does engagement - a significant driver of organisational performance.” He said talented employees will seek new pastures when they feel disengaged.
Unite Union’s general secretary Len McCluskey called the pay rise “obscene”.
The government should strongly consider giving shareholders greater legal powers to question and curb these excessive remuneration packages
Len McCluskey
“The government should strongly consider giving shareholders greater legal powers to question and curb these excessive remuneration packages,” he told the BBC. “Institutional shareholders need to exercise much greater scrutiny and control of directors’ pay and bonuses.”
Justifying this increase in earnings will not be easy for companies, especially at a time when employees across all industries are experiencing significant wage cuts and the economy is the toughest in a generation.
The prospect of big bonuses could encourage risky behaviour in directors, as it is widely understood to have at banks during the run up to the financial crisis.
The report’s editor Steve Totton said that committees should make sure they are able to provide thorough justifications for the bonuses being rewarded.
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