But reward complexity hides true value of soaring payouts
Pay for the UK’s top 100 chief executives grew by 10 per cent between 2011 and 2012 putting average staff wage rises in the shade, a major pay survey has revealed.
Bosses in the FTSE 100 took home an extra £45 million (10 per cent) in 2012 compared to the year before, according to the Total Remuneration Survey 2013 by Manifest and MM&K.
Such hikes in pay are a marked contrast to average employee wage rises of 2.5 per cent in the private sector, as reported by Incomes Data Services earlier this year, and the 1 per cent cap for public sector increases.
In fact total remuneration for this privileged few has increased faster than shareholder returns during the past 14 years. And as the growth in reward has been “almost entirely” driven by pay for performance policies, the report said, this shows such initiatives are not working.
For example, payouts from Long Term Incentive Plans, intended to link reward and company performance more closely, were up 40 per cent from 2011.
In addition to concerns that pay for performance policies are not working, the report also said that the complexity of valuing deferred bonuses hides and understates the reality of growth in total remuneration. The report said that real increases for top 100 bosses are actually about 8 per cent higher than figures quoted.
Deborah Hargreaves, director of think tank the High Pay Centre, said: “Once again, this unnecessary hike in executive pay shows that performance-related pay structures are completely flawed. They are too easy to reach, and reward business leaders for being in the right place at the right time rather than successful, sustainable management of their company.
“Executives have seen their rewards racing ahead of the rest of the workforce. Pay for everyone else has been frozen or failed to keep up with inflation. This leads to a great sense of injustice in the workplace. It is time for company boards to look at a major overhaul of executive pay."
The news comes as Burberry chief executive Angela Ahrendts became the first woman to top Britain's pay league with a total pay package of £16.9m, while the £17.6m remuneration package of WPP's Sir Martin Sorrell is threatening to spark a shareholder revolt this week.