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Share incentive schemes boost top executives' earnings | Share incentive schemes boost top executives' earnings |
(about 5 hours later) | |
Senior executives in the UK's biggest companies have seen their average earnings go up by more than a quarter in the past year. | Senior executives in the UK's biggest companies have seen their average earnings go up by more than a quarter in the past year. |
New research suggests the bosses of top firms made an average of £4m a year. | New research suggests the bosses of top firms made an average of £4m a year. |
But Incomes Data Services, which compiled the figures, says pay and bonuses have hardly risen at all. | But Incomes Data Services, which compiled the figures, says pay and bonuses have hardly risen at all. |
Instead the increase is due to a rise in value of long term incentive plans which have replaced cash bonuses. | Instead the increase is due to a rise in value of long term incentive plans which have replaced cash bonuses. |
The study looked at the earnings of directors of the 100 largest companies quoted on the London stock exchange, in the 12 months to June. | The study looked at the earnings of directors of the 100 largest companies quoted on the London stock exchange, in the 12 months to June. |
It showed that increases in basic pay and bonuses slowed almost to a halt - with pay rising in line with inflation, and bonuses falling. | It showed that increases in basic pay and bonuses slowed almost to a halt - with pay rising in line with inflation, and bonuses falling. |
However, earnings still increased by an average of 27%, largely due to the introduction of long term, share-based incentive plans for executives. | However, earnings still increased by an average of 27%, largely due to the introduction of long term, share-based incentive plans for executives. |
These plans - which are now used by 90% of top companies - are designed to match bonuses more closely to the return that shareholders make, says BBC business correspondent Jonty Bloom. | These plans - which are now used by 90% of top companies - are designed to match bonuses more closely to the return that shareholders make, says BBC business correspondent Jonty Bloom. |
Compared to competitors | Compared to competitors |
But since many started in the depths of the recession, executives have benefited as the stock market overall has bounced back, our correspondent adds. | But since many started in the depths of the recession, executives have benefited as the stock market overall has bounced back, our correspondent adds. |
Incomes Data Services said many executives were benefiting from the recent overall improvement in stock market performance. | Incomes Data Services said many executives were benefiting from the recent overall improvement in stock market performance. |
It meant that the value of long term investment plans had risen to an average of £938,000 for directors, and to £1.6m for chief executives. | It meant that the value of long term investment plans had risen to an average of £938,000 for directors, and to £1.6m for chief executives. |
The study also pointed out that the plans were often calculated based on a firm's performance in comparison with its competitors, rather than its own performance history. | The study also pointed out that the plans were often calculated based on a firm's performance in comparison with its competitors, rather than its own performance history. |
This meant that an executive might still be rewarded if the company's performance had deteriorated, as long as competitors had done worse. | This meant that an executive might still be rewarded if the company's performance had deteriorated, as long as competitors had done worse. |
Steve Tatton of Incomes Data Services said: "Whether a reaction to government pressure, shareholder concerns or a worse than expected business environment, it seems the brakes have been applied to the basic pay growth for FTSE 100 bosses. | Steve Tatton of Incomes Data Services said: "Whether a reaction to government pressure, shareholder concerns or a worse than expected business environment, it seems the brakes have been applied to the basic pay growth for FTSE 100 bosses. |
"However, while shareholders will be pleased to see more traditional elements of pay seemingly slowing, these figures show that directors' earnings can still grow significantly as a result of a complex mix of incentives." | "However, while shareholders will be pleased to see more traditional elements of pay seemingly slowing, these figures show that directors' earnings can still grow significantly as a result of a complex mix of incentives." |
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