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Directors' pay rose by 49% - what are your views on performance-related pay?

Research carried out by the Incomes Data Services (IDS) reveals that FTSE 100 directors have seen their total earnings increase by an average of 49% in the last financial year, and are now averaging £2,697,664 per annum.

IDS say that this increase was even higher than the 43% rise in total earnings for CEOs, which suggests that executive largesse is evenly spread across the board.

FTSE 100 directors also saw their average bonus payments increase by 23%, from £737,624 in 2010 to £906,044 in 2011.

Steve Tatton, editor of the IDS report, said: “The generous remuneration packages that FTSE 100 directors now  receive indicates a marked improvement in boardroom fortunes.”

“But with closer scrutiny of boardroom pay expected in the future, remuneration  committees will have to make sure that they are able to provide full and thorough  justifications for the bonuses awarded.”

“This means that they will have to be much more transparent about how total benefits packages are structured and how performance is measured.”

Total earnings of FTSE 100 directors rose across the board, with the breakdown as follows:

  • CEOs received an average increase of 43.5% (£3,855,172)
  • Finance directors received an average increase of 34.1% (£2,001,515)
  • All other directors received an average increase of 66.5% (£2,260,033)

What are your views on performance-related pay? What are the incentives that work?

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Simple solution

To Vince Cable there is a simple solution to all of this - give shareholders the vote!

By that I don't mean the pension fund and unit trust managers who are in the pockets of the Boards of the FTSE companies, I mean the ultimate shareholders.

In this day and age it should be relatively cheap to set up electonic voting on key aspects of corporate governance including all resolutions on boardroom pay and re-appointment of directors.

Remuneration committees are a joke.  Let each director justify his or her salary package directly to shareholder votes.

 

 

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50% tax whingers

Presumably this includes the directors who were complaining about the 50% tax rate the other week!

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Performance?

It depends upon what performance the pay is related. Some have the performance as being the share price which to me is ludicrous. Anybody who measures a company's performance by share price needs their head read.

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Interesting question

colinhigginson wrote:

It depends upon what performance the pay is related. Some have the performance as being the share price which to me is ludicrous. Anybody who measures a company's performance by share price needs their head read.

 

If managements priority isn't to increase the wealth of shareholders (by increasing share price), then what should it be?

 

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Who trusts the City?

WhichTyler wrote:

colinhigginson wrote:

It depends upon what performance the pay is related. Some have the performance as being the share price which to me is ludicrous. Anybody who measures a company's performance by share price needs their head read.

 

If managements priority isn't to increase the wealth of shareholders (by increasing share price), then what should it be?

 

Easy - to make profits to reinvest into the company to make further profits.

What do the idiots in the City know about valuing businesses? They love these share price fluctuations - they just make money daily at the expense of the private shareholder or pension funds.

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Short term risk

Doesn't that encourage them to limiting investment and taking excess risk in order to increase short term profits? And how about a dividend for the poor old shareholders?

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Profit trends

Just have bonuses based on a 5 year moving average of profits.

Poor old shareholders? Don't get me started on that. Privatisation of the 80's has caused us to be in the mess we are with energy bills. The cost of privatisation in the long term with ofgem, of com for phones etc - we would have been better off with it in national hands being run efficiently.

I have no time for the City - bunch of gamblers who reckon they know how to value companies.

How would you measure performance? 

 

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