High Pay Centre condemns latest executive pay increase

By 10.06.13BlogSeptember 2nd, 2020No Comments

10% pay increase as FTSE bosses cash in on Quantitative Easing

Think tank the High Pay Centre today condemned the latest increase in executive pay, showing that FTSE 100 Chief Executives took home an average pay package of £4.3 million in 2012, up from £3.9 million in 2011.

The Manifest/MM&K Total Remuneration Survey found that CEOs take home pay increased by 10%, while pay-outs from so-called ‘long-term’ incentive plans (LTIPs) were up by 40%.

The findings show the complete failure of performance-related pay packages tied to company share price. The Government’s programme of quantitative easing – effectively pumping money into the stock market – has caused share values to increase rapidly. This means a windfall for executives, thanks to the terms of their performance-related pay agreements, even though the increased share price owes nothing to their performance.

Deborah Hargreaves, Director of the High Pay Centre, said: Once again, this unnecessary hike in executive pay shows that performance-related pay structures are completely flawed. They are too easy to reach, and reward business leaders for being in the right place at the right time rather than successful, sustainable management of their company.

Executives have seen their rewards racing ahead of the rest of the workforce. Pay for everyone else has been frozen or failed to keep up with inflation. This leads to a great sense of injustice in the workplace. It is time for company boards to look at a major overhaul of executive pay.”

Notes to editors:

  • Long Term Incentive Plans, or LTIPs, normally take the form of shares awarded to executives if the company’s share price increases over a three year period. As share prices generally were at a low point in 2009, 2012 was a bonanza year for company bosses, even though changes in economic conditions were largely responsible for the increase since 2009
  • The Local Authority Pension Fund Forum (LAPFF) argued earlier this year that long-term incentive plans (LTIPs) should be phased out and replaced with a company-wide profit sharing scheme
  • The Pensions and Investment Research Consultants (PIRC) have also advised investors to reject all LTIPs
  • Research from PricewaterhouseCooper’s found that performance-related pay tends to have little effect on motivation, as executives discount the value of rewards that are not guaranteed…
  • …while the Salz report into the corporate culture at Barclays concluded that large bonuses encouraged staff to focus on hitting particular targets, regardless of the wider cost to the business