Prime Minister David Cameron has expressed concern after research showed directors at the country’s top firms have seen their pay rise by 49 per cent in the past year.
Despite rising unemployment and falling standards of living for most of the population, average earnings for FTSE 100 directors have risen to just under £2.7m, according to Incomes Data Services (IDS).
Mr Cameron said: “This is a concerning report, particularly at a time when household budgets are very tight and people have difficult circumstances.”
He called for “transparency, accountability, responsibility” in boardroom pay, arguing that all awards must be justifiable.
The research showed that directors’ 49 per cent increase in remuneration – including salary, benefits and bonuses – was higher than the 43 per cent jump in the pay of chief executives. Average bonus payments for directors increased by 23 per cent from £737,000 in 2010 to £906,000 this year, the report said.
The pay of FTSE 100 chief executives rose by 43 per cent in the last financial year to an average of £3.8m, while finance directors enjoyed a 34 per cent increase to take their average earnings over the £2m mark, according to the report.
Deputy Prime Minister Nick Clegg said it “can’t be right” that some company bosses were given “socking great big pay increases” when their firm’s performance had actually plummeted, adding: “That culture of reward for failure must change.”
Labour leader Ed Miliband said: “People are not against those at the top getting higher rewards if those rewards are earned, if more wealth is created, if more jobs are created. But when people are struggling, when the middle is being squeezed, when people are seeing their living standards fall, it is not fair for those at the top to get runaway rewards not related to the wealth they have created.”
Simon Walker, director general of the Institute of Directors, said: “The IoD will not seek to justify pay increases of nearly 50 per cent for FTSE executives. We want to make it very clear that this is not the picture across the rest of the private sector. In 2010 an IoD/Croner survey found that the average pay increase for directors of smaller, unlisted companies, was two per cent. Thirty seven per cent of executive directors of these companies actually had a pay freeze. It is crucial that pay is linked to performance.
“An important aspect of this is that shareholders should keep a close watch on management pay, and challenge where they do not think that executives merit their remuneration.
“Government action is not the answer. Trying to regulate, rather than getting shareholders and investors to demand action could create market distortions and damage the UK’s competitiveness.”