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Bosses’ bonuses nearly treble, but are we getting value for money?

September 6, 2015

business

Image by David Singleton

The latest report from the High Pay Commission has revealed that on average annual bonuses for FTSE 350 directors have gone up 187% since 2002. However, this isn’t reflected in company performance, as share prices have gone up only 21% in the same time frame.

Nine years ago, executive bonuses were worth around 48% of their annual salary, but they are now worth a whopping 90%. Add that to the average salary increase of 64% in the same time period, you get directors enjoying an annual bonus nearly three times fatter than what they received in 2002.

In the meantime, average share prices in the FTSE 350 have only gone up 21%, while pay for the average worker in the UK has only gone up 27%.

This goes to show that bonuses may not necessarily be reliant on good business performance. Deborah Hargreaves, chairman of the High Pay Commission, agrees: “There has been massive growth in what has been termed as performance-related pay yet no such corresponding leap forward in company performance.”

She also admits that changes to bonus schemes have been able to mask what executives really get paid. “Corporate governance reforms attempting to link pay with performance appear to have done little more than add to the huge complexity of executive packages, reward schemes and bonuses that make up the pay of FTSE 100 directors.”

This news is sure to irritate the average taxpayer, as these increases also apply to directors of failed banks who crashed the economy around three years ago. In fact, the average total earnings of directors in state-supported banks were just under £4m last year, compared with £1.7 million in 2000, an increase of 130%.

Are big directors getting paid too much? Let us know what you think in the comments section below!

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