UK Politics

David Cameron and Nick Clegg criticise directors' '50% pay rise'

Research suggesting pay for the directors of the UK's top businesses rose 50% over the past year has received a robust government response.

Incomes Data Services (IDS) said this took the average pay for a director of a FTSE 100 company to just under £2.7m.

Prime Minister David Cameron called for more boardroom responsibility. Deputy PM Nick Clegg called it a "slap in the face" for millions who were struggling.

Labour said the pay increases were part of a "something for nothing" culture.

The party's leader, Ed Miliband, said this was the case since the stock market had not risen to match the salaries.

"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," he said.

Mr Miliband added that it was not fair for those at the top to get "runaway rewards not related to the wealth they have created" when people are seeing their living standards fall.

The rise in pay for directors, covering salary, benefits and bonuses, was higher than that recorded for the main person running the company, the chief executive.

Their pay rose by 43% over the year, according to the study.

Mr Cameron, speaking in Australia, said the report was "concerning" and called for big companies to be more transparent when they decide executive pay.

He said: "This is a concerning report, particularly at a time when household budgets are very tight and people have difficult circumstances.

"We need accountability to strengthen the hands of shareholders so that they feel they are taking responsibility for remuneration in the boardroom. I think that is important.

"But above all there needs to be responsibility. Boards have got to think when they are making pay awards, is this the responsible thing to do?"

These sentiments were echoed by the deputy prime minister, who said: "The culture of reward for failure must change."

Mr Clegg went on: "I think some of them [pay awards] are incomprehensible and will strike most people as a slap in the face for millions of people who are on normal incomes and struggling to make ends meet.

"Too often there isn't enough accountability. Shareholders don't know what's going on and how these decisions have been arrived at and crucially there isn't a close enough relationship between high pay for people at the top and the performance of the company itself."

But Sir Martin Sorrell, chief executive of marketing firm WPP, defended executives' remuneration, arguing that it merely reflected global competition.

Sir Martin, whose pay increased by 17% last year, told BBC Radio 4's Today programme: "Look at what chief executives of media companies are paid in other parts of the world.

"We are a worldwide company, we are the leading company in our industry, the comparison, whether you like it or not, is with other companies in the world."

A statement from IDS said that that figure suggested that "executive largesse is evenly spread across the board".

'Obscene' pay

Base salaries rose by just 3.2%, although that was above the median rise recorded by IDS this week for average pay settlements of 2.6% for private sector workers.

The latest consumer price inflation figures showed inflation at 5.2%.

Directors' bonus payments, on average, rose by 23% from £737,000 in 2010 to £906,000 this year.

Around two-thirds of FTSE 100 companies are global operations, for whom the UK is a small part of their operation, including mining giant Rio Tinto.

The Unite union has called executive pay "obscene" and has called for shareholders to be given more power to hold directors accountable.

The union's general secretary, Len McCluskey said: "The government should strongly consider giving shareholders greater legal powers to question and curb these excessive remuneration packages."

And the TUC's general secretary, Brendan Barber, said reform should start with employee representation on remuneration committees, which he said would give directors "a much-needed sense of reality".

More on this story

Around the BBC

Related Internet links

The BBC is not responsible for the content of external Internet sites