Share incentive schemes boost top executives' earnings


Director of the High Pay Centre Deborah Hargreaves: "This is inefficient, you're not getting what you pay for"

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Senior executives in the UK's biggest companies have seen their average earnings go up by more than a quarter in the past year.

New research suggests the bosses of top firms made an average of £4m a year.

But Incomes Data Services, which compiled the figures, says pay and bonuses have hardly risen at all.

Instead the increase is due to a rise in value of long term incentive plans which have replaced cash bonuses.

The study looked at the earnings of directors of the 100 largest companies quoted on the London stock exchange, in the 12 months to June.

It showed that increases in basic pay and bonuses slowed almost to a halt - with pay rising in line with inflation, and bonuses falling.

However, earnings still increased by an average of 27%, largely due to the introduction of long term, share-based incentive plans for executives.

These plans - which are now used by 90% of top companies - are designed to match bonuses more closely to the return that shareholders make, says BBC business correspondent Jonty Bloom.

Compared to competitors

But since many started in the depths of the recession, executives have benefited as the stock market overall has bounced back, our correspondent adds.

Incomes Data Services said many executives were benefiting from the recent overall improvement in stock market performance.

It meant that the value of long term investment plans had risen to an average of £938,000 for directors, and to £1.6m for chief executives.

The study also pointed out that the plans were often calculated based on a firm's performance in comparison with its competitors, rather than its own performance history.

This meant that an executive might still be rewarded if the company's performance had deteriorated, as long as competitors had done worse.

Steve Tatton of Incomes Data Services said: "Whether a reaction to government pressure, shareholder concerns or a worse than expected business environment, it seems the brakes have been applied to the basic pay growth for FTSE 100 bosses.

"However, while shareholders will be pleased to see more traditional elements of pay seemingly slowing, these figures show that directors' earnings can still grow significantly as a result of a complex mix of incentives."


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  • rate this

    Comment number 1099.

    "you should of listened and worked hard at school, if you didn't, then it's tough...get over it"

    You should of? what does that mean? Did you mean "you should HAVE"? How can you make such an absurd claim when you don't even know how to write and clearly didn't pay attention at school yourself?

  • rate this

    Comment number 1098.

    the really annoying part of this article is the lazy journalism in using 'average' - as in:
    "...earnings still increased by an average of 27%"
    1) if you must use 'average', state which one (mean, mode, median)
    2)assuming you are using the mean, you must then also have a measure of the spread of the data - variaince/standard deviation

    The use of average in this article is meaningless

  • rate this

    Comment number 1097.

    Shame that share prices aren't up by the same percentage. We are seeing a period where the toughest squeeze on margins has begun with CEO's chasing the vanity of turnover whilst losing the sanity of profit. Other are just looking to see how they can raise profitability by tax avoidance and sharp practice. The banks lead the way now we will see business making the same mistakes.

  • rate this

    Comment number 1096.

    openly advertises to its staff that they can invest in company share schemes as a means of avoiding tax"

    They'll also openly advertise how much pensions contributions avoid paying taxes. In both cases these are special and limited exceptions. I know that cashing in stock options attracts IT and NI. Executive stock grants are not ways of avoiding tax obligations.

  • rate this

    Comment number 1095.

    Given that the top 1% of earners are likely to have ingenious methods of avoiding tax, if they do contribute 24% of total tax:

    a) what astronomical sums are they paid in order to do this,
    b) how much would they be contributing if they were PAYE 'plebs'.

    I'm all for top executives receiving top footballers wages, as I would be top nurses, top surgeons and top teachers.

  • rate this

    Comment number 1094.

    1081 generationdebt....We have every right to tell them as most of the working population have a stake in these companies through our pension funds who are major shareholders.

  • rate this

    Comment number 1093.


    If you think its too risky, dont complain about those who take that risk
    Ok, can we knock this "they take the risks" arguement on the head. You do NOT incur the same "risk" if you invest £10,000 if that amount represents 12 months salary as you do if it represents 10% of your annual wage. If the gamble fails the former will have nothing the latter will just have a bit less.

  • rate this

    Comment number 1092.

    ppuj, it is idiotic to beleive in absolute equality and clearly not the point i was making. greater equality in pay ha been acheived by a small number of high performaning countries that have far higher quality of life than we do. Your comment about left wing is as predeictable as it is shamefully uninformed.

  • rate this

    Comment number 1091.

    1071 If they are advertising these tax efficient schemes - plainly its your line of work and your bread and butter hence your anger - the chances of senior managers being on less 'efficient' schemes is zero.

    The same way that they are all still in final salary pension schemes

    I'm paying for them too

  • rate this

    Comment number 1090.

    And their investments all come tumbling down when the markets crash!
    A race to the bottom is still in the making so we will see you all at that point in the near future, i will be there waiting for you all with a very very big grin on my face and offer you a hand up from the floor, honest i will!

  • rate this

    Comment number 1089.

    The people elected a Tory Government who took junior Tories into a co-alition.- how on earth can anyone complain about activities that lie at the centre of Tory philosophy, derived from religion-"To him that hath shall be given"

  • rate this

    Comment number 1088.

    1052.David H
    Statistics show if you are on incapacity benefit more than 2 years,
    you are then more likely to die, than find a job.

    I'll bet that's cheered him up no end. The guy has already said he has mental health issues so it's probably even harder for him to get work given the amount of discrimination that goes on...

  • rate this

    Comment number 1087.

    Presumably the bosses at Ford think they are doing the right thing for someone by closing down their UK manufacturing.

    However, we in the UK would also be doing the right thing by increasing VAT on imports of Fords to pay the social cost to our economy of that company's actions.

    Then we can do the same to Apple, GAP, Starbucks et al. who either don't manufacture here or 'avoid' our tax.

  • rate this

    Comment number 1086.

    "how about you tell us how you make your money and how you seem to know so much about the tax system?
    Why should anyone listen to you?"

    I work in the tax department of a firm of accountants.

    Tax is my job.

    Listen if you want to learn.

  • rate this

    Comment number 1085.

    1035. Bastiat

    Dr Pangloss would be a more apposite soubriquet than Bastiat. You must live in the world as you find it, not in some fantasy world in which everything would be better if only it was run differently. Taxes are needed to provide the fabric of a modern society. Most of us debate how much and what they should be spent on. You argue, almost alone, about their necessity at all.

  • rate this

    Comment number 1084.

    Not happy with "unfair" wages? Don't spend money on the stuff that the companies that pay them produce. That's how the private sector works. It's not the responsibility of government to force private entities to do certain things with their assets.

  • rate this

    Comment number 1083.

    "If you think its too risky, dont complain about those who take that risk"

    Again and in tiny wee little easy words you can understand - they take no risk. They have no skin in the game

    Profits and dividends are down

    Their pay is up 5000% in 15 years.

    Money that in past eras would have gone to shareholders or employees - people who do work and take actual risks

    Trebles all round!

  • rate this

    Comment number 1082.

    Since this pay rise is related to long term incentive plans, then profits must be 27% up on previous the years profits, after tax...avoidance.

  • rate this

    Comment number 1081.

    I would resent people telling me how to spend my money. We have no right to tell private companies how to spend theirs. It is up to the owners and shareholders.

  • rate this

    Comment number 1080.

    I'm a shareholder in a few companies.
    I do not get a chance to vote on the pay awarded.
    I could, if I can find 500 other shareholders, and persuade them to write in, ask for a motion to vote on the directors pay. I might not be allowed that motion by the directors.


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