Directors of top companies have seen their median earnings increase by 14% in the past year, driven by a huge rise in share-based long-term incentive payments, according to a new report.
A study by pay analysts IDS found that basic pay rises for directors of FTSE100 firms were “relatively restrained” at 4%, while annual bonuses were 8.8% lower.
But the directors benefited from long-term incentive plans (LTIP), which jumped by 58%, taking the median total from £764,000 to over £1.2 million, the study revealed.
Steve Tatton, of IDS, said: “These divergent pay trends highlight the complex make-up of boardroom remuneration, illustrating that while one part of a director’s pay package may go down, another part may go up.
“With nearly two-thirds of FTSE directors benefiting from an LTIP award in the latest year, the higher share-based payouts clearly made up for any ground lost in lower annual bonuses.”
TUC general secretary Frances O’Grady said: “Britain’s top bosses are back to their old tricks as their pay is growing 20 times faster than the average worker.
“It’s one thing replacing bonuses with long-term incentive plans, but FTSE 100 companies are simply exploiting this change to make their fat cats even fatter.
“The time has come for legislation to put ordinary workers on the pay committees of companies. This is the only way to bring some sanity to the way in which directors are paid.”
Business Secretary Vince Cable said: “Pay increases at the very top have not always been an indication of how well a company has performed. That is why last month I introduced new reforms to make directors’ pay much more transparent, so shareholders can better understand what this country’s top bosses are paid and hold them to account.
“This mean that the total pay package, including pensions, share options and bonus must now be presented in a clear and simple format and will be subject to a legally-binding vote by shareholders.
“These reforms mean all shareholders, big or small, will no longer be kept in the dark through complex reporting methods on the performance of the companies they invest in. They will be able to challenge companies over excessive pay, preventing big bosses being rewarded for failure.”