Business: Bonuses for Bosses Defy Financial Crisis



Executives' total takehome pay rises disproportionate amount

Executives’ total takehome pay rises disproportionate amount

New research shows that the average bonuses for directors of FTSE 350 companies have risen by an incredible rate since 2002: 187%.

Bonuses Unmatched By Share Prices

The High Pay Commission released a statement on Monday showing that in 2002, average annual bonuses comprised 48% of salary, but now comprise 90%. Share prices and performance does not come close to matching the rise in bonuses. Deborah Hargreaves, Commission chairman, says of these findings, “The evidence exposes the myth that big bonuses and high salaries result in better company performances.”

The Department for Business, Innovation, and skills committed to studying this “interesting” report, which will be published in full in November. The commission is backed by the Compass group and Joseph Rowntree Trust.

The Salary Also Rises

During the timeframe of the report, the salary for bosses also rose by 63%. The total paypackages for FTSE 350 company executives, according to the study, have risen 700% since 2002, while the index rose a mere 21%. Additionally, over the past decade, the wages for an average worker in Britain have risen only 27% compared to 700% for executives.

Commission chairman Hargreaves explained this salary inflation as “a massive growth in what has been termed as performance-related pay” but companies seem to be paying more to executives without any actual results. Compared with the boost in overall bonus and salary pay, “there is no such corresponding leap forward in company performance.” Hargreaves says that it is partially the fault of “corporate governance reforms attempting to link pay with performance” but that really just complicated the packages, bonues, salaries, and reward schemes that make up the pay FTSE executives. She suggests that remuneration changes and complicated bonus structures can mask the actual rises in pay that do not correspond to a rise in shares or profits.

John Cridland, director general of CBI, told the BBC that he favours high financial rewards for high achievement, but payment for failure was not acceptable.

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