Fury as top bosses' pay rockets 30%
 

The biggest guns in Britain's investment armoury are ranged up against them. But top directors have still managed to achieve average pay rises of nearly 30 per cent in the past year.
 

And as investors' fury over long contracts, share option windfalls and excessive payments for failure deepens during the annual meeting season, research by Financial Mail shows that the typical chief of a FTSE 100 company earns £1.2 million in salary and bonuses.

That figure does not take into account the large gains that most executives make on their share options, nor the substantial pension top-ups now being showered around the boardroos.

The rises - a stunning ten times the rate of inflation and ten times the rise in average earnings - come despite a deluge of profits warnings from some of the biggest corporations and a huge slump in their share prices.

It would now take the average work 58 years to earn what a typical FTSE boss picks up in just 12 months.

Though some of the best rewarded directors have taken pay cuts - Sir Chris Gent at Vodafone and Jean-Pierre Garnier at GlaxoSmithKline both accepted big reductions - there are still 14 top executives earning more than £2 million a year.

Nearly half of all top bosses take home more than £1 million, according to figures from voting agency Manifest.

A junior doctor can expect to earn £25,000, a postman £13,000 and a London Underground Driver £31,000. Lord Browne, the boss of oil giant, BP earns more in a day than a London bus driver does in a year.

The yawning gap between pay rates at the top and bottom of business comes only days after Paul Myners, the former chairman of fund manager Gartmore and a fiery critic of boardroom standards, called for executives to link their pay more closely with that of their employees.

In a speech at Cambridge University last week, Myners said firms should compare bosses' pay not with executives in other organisations, but with what was happening on the shopfloor.

'Executives who seek an ever widening gap between their compensation and those they employ will have to explain why they appear unable to recruit and retain high quality subordinates,' he said.

And last weekend, top US investor Warrent Buffett again lambasted boardroom excess at his company's annual meeting.

'It's grotesque', said one senior investor. 'I know we agreed some of these packages, but I think the Government should look at reintroducing supertax if we can't curb the pay explosion.'

Employers' organisation the CBI is now looking into ways in which payments for failure can be reined in. John Weston, former chief of defence group BAE Systems, for example shot into the £1 million bracket after being given a £520,000 golden goodbye.

Trade Secretary Patricia Hewitt is also working on plans that would limit the length of service offered to directors. She has suggested a ceiling of six months, though investors think a year would be more realistic.

Hewitt is also keen that shareholders insist on boardroom pay being more closely linked to the performance of companies.

Regardless of earnings, the increase for those at top companies has fallen into single figures just twice since the late Eighties and has topped 25 per cent in six of the past 12 years.

Steve Tatton of Incomes Data Services said: 'There is no connection between what these people earn and the performance of their companies,'

One of the reasons, he said, is that a large part of executive's pay package is basic salary and that does not relate to company performance.

And even when companies try to link part of executive pay to performance, the consequences can be embarrassing.

Richard Harvey, chief executive of insurance group Aviva, saw his package rocket by 45 per cent to £1.42 million last years, thanks in part to a long term incentive plan maturing.

Meanwhile, policyholders suffered big bonus cuts and shareholders saw their investment shrink in the falling market.

Financial Mail on Sunday

11 May, 2003

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