Tuesday, 27 October 2009

Targets made easier to hit for UK Chief Executives

Why does this not surprise me?

Despite the country being in the depths of recession, the chief executives of Britain's top companies earned the same amount in the past year as they did during the booming economic times in 2006.

According to pay specialists Income Data Services, the total cash remuneration for the bosses of companies in the FTSE 100 fell by an average of just 1.5% in 2009 compared with 2008, with a 29% drop in bonuses partially offset by a 7.4% rise in salary.

Or, in plain English, what the Chief Executives lost on the bonus swings, they more than made up for on the salary roundabout.

Though the reduction in bonuses may be the largest fall in the past decade, it still means that the typical chief executive took home an extra £500,000 on top of their basic salary. The IDS research also shows that the average bonus payment fell from £707,000 to £502,000 over the past 12 months. Hard times indeed for the Chief Executives!

A spokesman for IDS said that "what is surprising is that the credit crunch has had so little impact on the rate at which chief executives' salaries are rising. Salaries for FTSE-100 chief executives are rising twice as fast as salaries for shopfloor workers."

It also seems that the chinning bar is being lowered to increase the likelihood of success for the Chief Executives. The IDS spokesman said: "This recession is posing difficult questions about how directors should be remunerated. When incentive plans fail to trigger, remuneration committees often respond by redesigning schemes so that targets are easier to hit.”

Shareholders are understandably becoming worried that the rules of the game are constantly changed and this has provoked a number of pay protests at company annual meetings this year, including at Royal Bank of Scotland, Shell and BP.

The HR Case Studies editorial team will be returning to this issue over the course of the week, but feel free to add your comments below!

Company bosses' earnings remain at boomtime levels

  • Can there be justification for Chief Executive Salaries to be rising at twice the amount of shopfloor workers?
  • What are your views about the suggestion that the targets for Chief Executives are being made easier to hit?


  1. Have a heart – a drop of £205,000 in bonus payments will seriously impact on the number of pairs of Jimmy Choo slippers that Mrs Senior Exec can afford! And don’t forget the mortgage payments on the country pile - these guys may well be mortgaged up to the eyeballs!

    Would be interesting to see whether those organisations that are choosing to lower the targets for executives are equally lowering the performance targets for their shop floor workers? I would suspect that those targets are actually being increased in the effort to drive up performance – probably brought in during some hard pay negotiations for a minimal percentage increase.

    And I thought we were moving away from a society of haves and have nots - how wrong can one be!


  2. EBTG: Thanks again for an informtive comment. Interestingly enough, the latest post highlights that the approach adopted by BMW takes a totally different stance to the one that seems to be common in the UK - that of ensuring that all employees in the organisation are fairly and equitably rewarded