Executive pay soars as plans to curb excess are ‘diluted’
Britain’s blue-chip bosses saw their pay rise by by 10 per cent in 2011, while their staff earned just 1 per cent more. So why is Vince Cable watering down plans to control executive pay?
Chief executives at Britain’s top companies made an average of £4.8m in 2011, roughly 200 times the typical £24,000 private sector wage.
Prime Minister David Cameron has already said the “merry-go-round” of super-rich bosses approving colleagues’ inflated pay packages must stop, so the government U-turn on executive pay flummoxed shareholders reading about soaring packages.
Barclays’ Bob Diamond (see photo left) is the best-paid boss in the UK, bringing home almost £21m in 2011 in “realisable” remuneration – salary, deferred bonuses, performance incentives and other perks – according to research by consultancy MM&K and proxy voting agency Manifest.
Sir Martin Sorrell, the WPP chief who faces shareholders on Wednesday, was second in line, earning £11.6m in 2011 followed by David Brennan, of AstraZeneca, who muddled through on £11.3m (full top 10 list below.)
The base salary for Britain’s premier league directors rose 2.5 per cent between 2010 and 2011. One in four earned 41 per cent more last year than in 2010, Manifest and MM&K said. In comparison, the average worker saw a 1 per cent salary increase.
Worrying pay increases
“Executive pay is still rising at a surprisingly high rate,” Roger Barker, head of corporate governance at the Institute of Directors, told Channel 4 News. “It is worrying that the government is about to pull back on its plan for a binding vote.”
The government plan, mooted by Business Secretary Vince Cable, was to give shareholders an annual vote on executive pay and bonuses, a radical reform from the current situation where shareholders have the right to an advisory vote which companies are free to ignore.
Mr Cable lowered expectations in a Sunday Times interview, however, saying that “if investors have to do that (vote) every year with every company on the stock exchange, they could get tied up in bureaucracy”.
Shareholder lite
Mr Cable is now considering allowing shareholders to vote once every three years instead, although no firm decisions have been made. The back-tracking surprised and disappointed shareholders and activist groups watching the ever-widening spread between executive pay and staff remuneration.
“It is up to shareholders to deal with it, but they don’t have the tools to deal with it,” said Tom Powdrill, of London-based shareholder pressure group PIRC, told Channel 4 News.
Shareholder angst
Shareholder pressure has already been felt this year by Barclays, Aviva’s Andrew Moss and AstraZeneca’s David Brennan and further pressure is expected when WPP holds its annual meeting on Wednesday.
“Remuneration committees need more support from shareholders in order to control management’s requests for greater and greater rewards.” Manifest chief executive Sarah Wilson said.
Toast the UK’s Top 10 Bosses:
1. Bob Diamond, Barclays, £21m
2. Sir Martin Sorrell, WPP, £11.6m
3. David Brennan, AstraZeneca, £11.3m
4. Sir Andrew Witty, GlaxoSmithKline, £10.7m
5. Marius Kloppers, BHP Billiton, £9.8m
6. Peter Voser, Shell, £9.7m
7. Sir Frank Chapman, BG, £9.6m
8. Michael Spencer, ICAP, £9.4m
9. Samir Brikho, Amec, £9m
10. Dame Marjorie Scardino, Pearson, £9m