Wednesday, 29 August 2007

Exec pay is massive - shocker

Another exec pay story already... The Grauniad has published its annual survey of executive pay in the FTSE100 today. Guess what - total rewards have gone up again, this time by 37%. That's about 11 times the increase in average earnings, and puts FTSE100 chief execs on average on about £2.9m in total. Meanwhile the ratio between employee and directors pay is now almost 100:1, although in some companies with lots of low-paid staff (supermarkets etc) the ratio will be a lot higher.

The Institute of Directors has made the half-decent argument that we shouldn't inform our views on exec pay by looking solely at the FTSE100. That's true. The survey is based on less than 1,500 directors (including over 800 non-execs). They are a small group of people, and most company directors don't earn anything like the amounts being talked about.

However, you do have to wonder how long this widening gap in the division of the rewards from our economic system can be allowed to continue. Why does it take substantial year-on-year increases to get corporate leaders to do the job? Why are they so much more valuable than the rest of us, and why does their notional superiority (as expressed in the rewards they receive) increase every year? I think in the longer term this can only undermine people's faith in the economic system (for me this is a Bad Thing by the way).

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