NEW remuneration rules, concerning the pay rewards of top executives, have led to more restraint in the level of bonuses being paid in the boardrooms of the world.
Ernst & Young’s Future Horizons report suggests that increasing regulation is cutting the percentage gap between the rises received by top bosses and their employees.
The new regulations require companies to disclose the pay increases paid to their employees, alongside those paid to their top executives.
According to the research by Ernst & Young, many chief executives received increases of less than one per cent, and many 2.5 per cent less than the rises paid to other employees.
But, while the total amount they earn may have fallen, FTSE 100 listed company directors still earn 120 times more than a full-time employee, according to research from Incomes Data Services (IDS).
According to IDS, executive pay has escalated at a far faster level than that of average employees. In 2000, executives of top companies earned 47 times more than the average employee.
In comparison, in 2014, IDS claims a director typically earns £2.43million a year, while the average annual salary of an employee is just £27,000.
That equates to a 278 per cent rise in the pay of FTSE100 bosses, compared to just a 48 per cent rise for full-time employees.
Steve Tatton, editor of the IDS report, said: “FTSE 100 directors have seen their total earnings jump sharply in the last year, fuelled by a rise in the value of share based awards. Bonus payments have also recovered strongly following a downturn last year.
“The pattern of pay growth highlights the complex make up of directors’ remuneration. Salary rises may be modest, but this can be more than made up for by the receipt of incentive payments. “When such incentives pay out, they can pay out substantial sums, giving a significant boost to directors’ earnings.”
The high value of incentives is causing upset amongst shareholders of public companies. CareerBalance notes that the new CEO of UK retailer Tesco has been awarded £3.8m in shares on joining the business, whilst its outgoing Chief Executive could receive a pay out package worth £10m after being forced to resign.
According to IDS, the total earnings of chief executives in FTSE 100 listed companies, broken down by sector, were largest in the Media, Marketing and Telecommunications (£6.98million), Transport and Leisure (£5million) and financial services (£4.73million) sectors.
The IDS report is available to download from http://www.incomesdata.co.uk/books/view/directors-pay-report/