An organisation known as “IDS” (Income Data Services) part of Reuters-Thomson has signalled a rather worrying affront on shareholders and customers across FTSE100 constituents. Admittedly many FTSE100 companies are international goliaths but the recent statistics surrounding Directors pay at these constituents is rather alarming.
According to “IDS” Directors pay (that is defined as a combination of salary, benefits and bonuses) averages out at £2.7 million per Director of every FTSE100 company. Crikey! But what is more alarming is that this ever-increasing trend has risen an astonishing +49% in the last year with CEO’s at +43%; note FTSE was +3% to end-March 2011. This suggests that the roles of Non-Executive Directors and Remuneration Committees are being amply rewarded for monitoring CEO’s and are now playing catch up or possibly to act as ‘defenders of the faith’, a kind of buffer zone between management and shareholders. It has long been suggested that Directors pay has been out of control but today things seem to be totally skewed. The argument used to be that the CEO of GlaxoSmithKline for example needed to be rewarded for the substantial profits that GSK made globally and indeed for many years this argument held but let’s face it many companies today like GSK have gone (almost) ex-growth. The reward/remuneration game is totally out of synchronisation with the rewards that shareholders obtain although this is being shielded by the fact that equity yields exceed bond yields by a record basis points gap. It’s time for UK institutions to put a stop to this absurd reward culture but I suspect that there’s only a fat chance of this happening for the ever fattening cats at the top. The roof may well get slippery hereon though!