Meaningless numbers hinder meaningful debate over pay
SOME media organisations are likely to carry a headline along the lines of this today: “City Fat Cats Award Themselves 10pc Pay Rise”. A press release sent out by Incomes Data Services (IDS) does indeed claim that pay increases for FTSE 100 non-executive directors averaged 10 per cent last year.
Closer inspection proves the claim to be misleading. To arrive at the 10 per cent figure, IDS excluded all the firms that did not award pay increases to their non-execs (around a third). If these firms are included the figure falls – by three fifths – to a median of four per cent (which is why our front-page story has a different number to others).
It’s a bit like a school claiming its average GCSE grade was an ‘A’ by excluding all those who got grades ‘B’ through to ‘F’.
Four per cent is still higher than the all-UK pay increase (around two per cent), but it remains a real-terms pay cut when you consider CPI inflation was 4.2 per cent over the same period. At any rate, a four per cent rise would be less likely to get the headline writers excited.
A pay rise of four per cent is also justifiable when you consider that the role of a non-exec has got considerably tougher in recent times, as a result of the financial crisis and greater scrutiny.
IDS, you’ll remember, is the research house that recently stoked the row over high pay by claiming that earnings for directors of FTSE 100 went up by 49 per cent last year, which hugely exaggerated the real picture. It used similarly questionable methodology then too.
In the future, IDS and others should remember it is impossible to have a meaningful debate on executive pay when so many of the numbers are meaningless.