How fat cat pay defies the age of austerity
We are, as David Cameron reminds us, all in this together. A squeeze on our incomes? We're all meant to feel it.
Controversy: RBS chief Sir Philip Hampton faces protests on Tuesday
A willingness to make personal sacrifice for the common good? No one should shirk their duty to the country as a whole.
But the message of shared sacrifice seems to have escaped the men and women at the very top of British business - even those at BP.
Investors vented their spleen yesterday over the large packages awarded to current and former bosses, despite the Deepwater oil spill and the botched attempt at an Arctic exploration deal with Russia's Rosneft.
RBS chairman Sir Philip Hampton is braced for protests over bonuses paid to top staff at the state-controlled bank at its annual meeting on Tuesday.
And new Reckitt Benckiser boss Rakesh Kapoor can expect to trouser a fortune after his predecessor Bart Becht took home £92m in 2009.
As the first anniversary of the Coalition's taking power approaches, there is no sign that Britain's largest companies are making any effort to rein in the sums that they pay to the people at the helm.
As the main annual shareholder meeting season kicks off - when investors get to see what companies with December financial year-ends paid their directors in 2010 - there is little evidence of restraint
Certainly, the pay of high-flyers within the public sector have shown striking growth: over the past decade, for example, chief executives of local authorities have seen the pay rise by 76% - more than twice the increase seen by employees across the economy.
But the figures for chief executives of large quoted companies are far, far higher. According to Incomes Data Services, the increase for FTSE-100 bosses was a spectacular 161 per cent.
Someone mid-way down the 2010 pay league for chief executives of local authorities had pay of £144,000. Good money, certainly: few would complain at having to rub along on £3,000 a week.
But compare these numbers with the sums at the top of the private sector. A chief executive half-way down the league table for total earnings in the FTSE 100 received about £2.3m in salary and bonuses but excluding share options.
The average for the group was dragged far higher by the huge sums being taken by few high- earners at the very top of the pecking order: the average was £4.9m. 'Salary increases for FTSE 350 chief executives last year were very small,' said Steve Tatton, who compiles details of directors' pay for IDS. 'But increases in bonuses were very heal thy indeed.'
So what about this year? Details of pay awards for companies whose financial years finish at the end of December have only begun to emerge over the past few weeks.
The explanation for large rewards is usually that companies must keep up with the pack in order to regain top talent. The effect is that a big increase at company A bolsters the argument for a big increase at company B; and that, in turn, adds pressure for a further increase at company A.
So the spiral continues.
Outsourcing company Capita is proposing a new 'Co-Investment Plan' for chief executive Paul Pindar. This will give Pindar the right to shares in the company for which he pays nothing - if it meets certain targets.
The reason for introducing the scheme is, says Capita's annual report, because 'the Remuneration Committee cannot ignore the advances in FTSE executive pay practices over the last few years'.
Take a second example. Arms manufacturer BAE Systems is introducing what it cal ls a 'Restricted Share Plan' for executives at its American arm, headed by Linda Hudson. There is no pretence that this will help encourage executives to do well.
Quite the reverse: it shifts money from a performance-based reward to rewards that will be collected by an executive simply for staying with the company however well or badly he or she performs.
The scheme, says BAE, should help it retain staff and reduce the risk of their being poached. According to the latest annual report, 'the retention issue is sufficiently serious and potentially damaging to the business to require action'.
Bizarrely, BAE insists that the new scheme will stay under the umbrella of its Long-term Incentive Plan - although it lacks any incentive to do well for the company.
Will the new age of austerity cause companies to rein in executive pay?
Said Steve Tatton of IDS: 'There seems no real will to do so. It's rather like the bankers' bonuses issue: there will be lots of hand-wringing, but I can't see any sign that things will change.'
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