CEO Earnings Raised in the Last Decade

    January 3, 2007

The last studies and figures show that the gap between the pay of a FTSE 100 company’s chief executive and that of a regular worker has widened to its highest level this decade.

Incomes Data Services, an independent research organisation providing information and analysis on pay, conditions, pensions, employment law and personnel policy and practice, advises that chief executives earned on average 98 times more than the average for all UK full-time workers.

The interesting part is that ten years ago the pay differential was 39 times that of the average worker.

FTSE Group calculates over 100,000 indices covering more than 48 countries and all major asset classes providing an evolving range of index products to help investors make more informed investment decisions with confidence.

The figures show that FTSE 100 chief executives in 2005 and 2006 had pay rise, on average, of 43 per cent. Only part was made from salaries. FTSE 100 directors also cashed in with deferred bonuses, performance share plans and share option plans.

FTSE 100 directors target bonuses were 75 per cent and the actual bonuses for FTSE 100 CEOs in 2005 reached 108 per cent. Finance directors in FTSE 100 companies also fared well, with a maximum bonus of 111 per cent of their salaries and a target bonus of 66 per cent.

Finance directors’ actual bonuses in 2005 reached 92 per cent. Other executive directors received a maximum bonus of 100 per cent and a target bonus of 75 per cent of their salary.

Actual bonuses for other executive directors in 2005 reached 91 per cent. The IDS study found that if a year ago the average bonus was 100 per cent, this year it went up to 130 per cent of the executive’s salary. The most common performance measure for all board directors was personal performance.

But a new study published by Deloitte, the business advisory firm, reveals that FTSE executives are made to earn their pay as shareholders which demands increasingly sophisticated performance measurement.

Executive remuneration packages at FTSE 350 companies are becoming ever more dominated by performance based elements of pay, and the performance measures used are increasingly aligned to a company’s business strategy.

The earnings of FTSE 100 chief executives had increased about 102 per cent while the average employee had seen their pay rise 28 per cent since 2000 reveals the Directors’ Pay Report.

From all FTSE 350 chief executives more than half earned more than 1m and five executives saw earnings top 10m.


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