FTSE 100 directors have seen their bonuses crash over the last year, according to new figures released this morning.
Bonuses are down 4.9 per cent in the last year for directors on the boards of the top 100 companies on the FTSE, Incomes Data Services (IDS) unveiled today.
Pay growth was narrowly above the rate of inflation, rising 3.5 per cent, the report said.
The consumer price index level of inflation was 4.8 per cent at this time last year, but fell to 2.2 per cent in September. The retail price index was at 2.6 per cent in September.
“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,” said Steve Tatton, editor of the IDS Directors Pay Report 2012-13.
Yet top City earners will have been relieved to see the value of their long term share awards increase considerably.
The value of long term incentive plans (LTIPs) has soared, providing a boost to the City’s high level executives. The worth of these long term reward systems rose by 81 per cent from a median of £519,625 in 2011 to £938,888 this year, the report said. And for chief executives, the value of vested LTIPs reached a lucrative median of £1.6m.
“When equity prices were low, as in 2008 and 2009, directors were allocated a large block of shares,” Tatton explained. “When share prices have subsequently risen, as they have since the depth of the recession, directors have had the potential to profit from ‘windfall’ LTIP gains.”
The effect of the rise in LTIP value means that total earnings are up by a median rate of 10 per cent, according to the figures. The median of FTSE 100 CEOs’ total earnings was £3.2m.
“LTIPs are now used by more than 90 per cent of the FTSE-100 and are designed to incentivise directors over a longer term period,” IDS explained.
“They are typically granted in the form of shares and are closely linked to shareholder returns, with directors typically having to reach a minimum target before any shares are granted”