Tuesday, January 10, 2012

executive salaries

In the latest year, Mick Davis of mining company Xstrata took home £18.4 million. Michael Spencer, the former Tory party co-treasurer who runs broker Icap, got £13.4 million. And Bart Becht, the just retired boss of Cillit Bang maker Reckitt Benckiser, earned £17.9 million.

How can anyone be worth that?

Between 1999 and 2010, the median remuneration of a FTSE-100 chief executive rose annually by an average 13.6 per cent – up from just over £1 million to more than £4.2 million. Over the same period, the average annual rise in the FTSE index was just 1.7 per cent. By comparison, average employee earnings increased by 4.7 per cent a year. In 1998, the CEO earned 47 times the average worker; by 2010, the figure was 120 times.The average FTSE-100 chief executive is paid 35 times more than the average hospital consultant and 162 times the average teacher.

Chief executives do not have any say in their own pay; that is the job of a company’s remuneration committee, made up of a handful of non-executive directors. Usually they deal with four elements of pay – basic salary, pension, annual bonus and a share-based long-term incentive. It has spawned a relatively new industry – remuneration consultancy.


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