April 2024

Britain’s executhieves have never had it so good – but they still want more, more, more

The economy may be stagnant. Our ever-rising national debt may be pushing us towards bankruptcy. We may be suffering from low wages and high inflation. But Britain’s bosses have never had it so good.

The figures are almost beyond astonishing. In the mid-1980s, executives at the FTSE100 companies were earning  about 12 times the average wage. By 2012, this had rocketed up to 185 times the average wage, giving FTSE100 executives over £4.5m a year each. Actually, most are only on a basic salary of a bit over £800,000. But once you add in all the extras – long-term incentive plan, bonuses, share options, pensions and other benefits (see picture) – for most, the final figure rises comfortably above £5m:

Of course, business leaders will justify the massive increases in their rewards (compared to the stagnation of their employees’ pay) by pointing out the huge value they create. But the figures suggest that the value of British companies has declined by over 20% since 2000, while average executive compensation has doubled.

Many executives are not being paid for results – they are just looting the companies they are running. They get away with this larceny because they appoint the people on their remuneration committees. The members of remuneration committees usually come from a small elite circle of business leaders, financiers and free-loading politicians and peers (the new oligarchs I described in yesterday’s blog). And many executives sit on their chums’ remuneration committees. So, they all have an interest in continuously inflating executives’, and their own, rewards.

As economist JK Galbraith wrote over thirty years ago: “The salary of the chief executive of the large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself”.

(Tomorrow – Britain’s 20 most overpaid bosses)

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