Huge Leap in Top Directors' Remuneration

FTSE 100 directors have seen their total earnings rise by an average of 49% in the last financial year, with much of the increase down to larger bonus payments, according to research by Incomes Data Services (IDS).

Average bonus payments for FTSE 100 directors increased by 23%, from £737,624 in 2010 to £906,044 in 2011. In comparison, their base salary only rose by 3.2%. In total, taking into account fixed pay, bonuses and the value of any long term incentive plan (LTIP) awards, average earnings were £2,697,664 per annum.

IDS’s analysis shows that FTSE 100 directors’s pay rates outpaced CEOs, who received an average increase of 43.5% (£3,855,172). Pay rates for finance directors were up by an average of 34.1% (£2,001,515), while all other directors received an average increase of 66.5% (£2,260,033).

Steve Tatton, editor of the IDS report, said: ‘Britain’s economy may be struggling to return to pre-recession levels of output, but the same cannot be said of FTSE 100 directors’ remuneration. The pay gap between the boardroom and the shop floor does not yet show any signs of closing.’

Tom Gosling, partner at PwC, said the IDS survey was focused on 2010 data, but cautioned that if current trends continue, remuneration committees will need to demonstrate that they are acting responsibly in the context of a worsening business outlook and growing cost constraints within businesses.

‘Of more interest is what will happen in the coming pay round, with the economic outlook much more uncertain. Our recently published survey of 77 major companies showed that fully 78% expected executive pay to increase further in 2012 with only 3% predicting a decrease. Over 90% of companies are expecting to increase base salaries, with around 30% expecting to increase bonus or long term incentive awards,’ Gosling said.

‘With closer scrutiny of boardroom pay expected in the future, remuneration committees will have to make sure that they are able to provide full and thorough justifications for the bonuses awarded. This means that they will have to be much more transparent about how total benefits packages are structured and how performance is measured,’ Tatton said.