Claims that directors’ pay is being pushed up by demand for UK executives in the US are “based entirely on fantasy”, unions claimed this week.
The TUC says there is no evidence of strong demand for UK executives abroad. It puts the increase in executive pay partly down to a small number of high-profile companies that have recruited executives from abroad.
It says this has led to the companies paying their new recruits US-level salaries, pushing up packages for UK executives.
Ruth Lea, head of the policy unit at the Institute of Directors, agrees that US recruits have pushed up UK salaries. But she disputed the TUC’s claim that there was no demand for UK executives in the US.
She added, “It is a very small market and one of the things that the critics of this system invariably do is to suggest that this so-called fat cat pay applies generally. It does not. Most of our members earn less that the general secretaries of some unions and take no more than the rate of inflation as a pay rise.”
According to TUC research, pay increases for top directors have been rising at four times the rate of their staff for the past five years.
Researchers found the average pay for directors of FT share index member companies was £239,000 in 1994, excluding share options and bonuses. By 1999, they found, this rose to £410,000, an increase of 72 per cent, compared with 18 per cent for employees from £17,332 to £20,485.