Source: High Pay Commission (UK)
Taken from Foreword
The total earnings for the top-paid director at BAE Systems have increased by more than 8,000 per cent since 1978 when the company was called British Aerospace. That compares to a rise of 556 per cent in median male income over the period. Many factors have driven up pay at the top, but one of the most important when it comes to directors’ pay has been the mantra that rewards must be linked to company performance.
Since the 1980s, corporate governance reforms have all tried to align directors and shareholders’ interests by linking pay to performance. However, as we show in this latest report prepared for the High Pay Commission by Incomes Data Services, there is rarely a link between directors’ incentives and the way a company performs. In the past 10 years, the average annual bonus for FTSE 350 directors went up by 187 per cent and the average year-end share price declined by 71 per cent.
Many companies that have not survived over the period paid above the odds to their directors. This is no more evident than in pay at the bailed-out banks where rewards were much higher than the norm. Pay for performance has added to the staggering complexity of executive packages and yet there is no clear evidence that it works.
Click here to read the full report