LONDON REPORT:Bonuses may have fallen but companies are using inventive ways to bolster directors' pay, writes FIONA WALSH
THERE’S A simple solution to corporate greed – more women in the boardroom.
Not necessarily because women are more reasonable or more restrained in their demands but because, for all the talk of equal opportunities, Britain’s boardrooms remain overwhelmingly male and those women who have broken through are paid only a fraction of the going rate.
The Guardian’s annual pay survey revealed this week that the directors of Britain’s 100 leading companies rewarded themselves with a collective total of more than £1 billion (€1.12 billion) last year, despite a near 30 per cent fall in the value of their companies.
Their basic salaries leapt by 10 per cent, more than three times the increase awarded to employees in the private sector.
Between them, the top 10 best- paid directors collected a record £170 million last year, up from £140 million in 2007, and £70 million five years ago.
Leading the pack, with a total pay package worth £36.8 million, was Bart Becht, chief executive of the Dettol to Harpic cleaning products group Reckitt Benckiser, who has earned more than £80 million over the last three years. Yet the highest paid woman in the FTSE 100, Cynthia Carroll of mining giant Anglo American, earned little more than 10 per cent of Becht’s total, at £4 million last year. Carroll was also the only woman whose basic pay topped the £1 million mark, compared with the 21 male executives who made it into the millionaires’ club.
Snapping at Carroll’s heels with a package of £3.9 million was Linda Cook (50), the former head of gas and power at Shell.
Widely regarded as one of the world’s most powerful businesswomen, Cook resigned from the oil giant earlier this year after losing out in the race to secure the top job.
Indeed, it was only by resigning that she ensured her place as Britain’s second-highest-paid female FTSE director, as the bulk of the £3.9 million is accounted for by a pay-off for quitting the company she had been with for almost three decades.
While Carroll might feel aggrieved at earning only a fraction of Becht’s rewards, imagine how Reckitt Benkeiser employees feel – the survey reveals the company has the biggest ratio of chief executive pay to average wage (£26,700) – an astonishing 1,374. At Tesco, (average salary £10,000) the ratio is more than 900.
Five years ago, there were 17 women who held full-time executive positions in FTSE 100 companies, a figure that crept to 22 last year. There should undoubtedly be a far greater representation but packing Britain’s boardrooms with lower- paid women is not, of course, a serious solution to the problem of corporate greed.
Nor is raising the level of women’s pay to match the excessive levels of their male colleagues the answer; it might bring a long-awaited equality to the boardroom, but would do nothing to address the wider social issue of the growing pay gap between bosses and workers.
Even the worst recession in decades has failed to bring directors to account – while the Guardian survey showed that bonuses did fall last year, companies employed ever more inventive ways to bolster directors’ remuneration, not to mention the simple manoeuvre of inflation- busting increases in basic salaries.
The widening gap between ordinary employees and their boardroom bosses is underlined by their pension arrangements.
As millions face inadequate provision for their retirement, more than two-thirds of FTSE 100 directors are still members of lucrative final-salary schemes. Directors also switched millions of pounds of pension contributions into cash last year, enabling them to side-step new tax relief rules.
In some cases, directors were granted cash handouts of as much as 40 per cent of their basic pay in lieu of already generous pension contributions.
Then there were the perks. These ranged from fairly standard private healthcare and company car, often with a driver, to corporate jet usage, school fees and social club membership. One director even enjoyed the services of a gardener.
Relocation allowances also proved pretty lucrative, particularly in the case of the £500,000 granted to ease the move of Vodafone chief executive Arun Sarin. And for Sir Moir Lockhead – who just happens to be chief executive of First Group, Britain’s biggest bus and train operator – there was £5,000 worth of free petrol for his private use.
Legislation may in the end be the only answer to corporate greed – and not just for bankers, who have, rightly, taken the brunt of the recent public outrage. They are not the only offenders, as the Guardian survey shows.
Fiona Walsh writes for the Guardian newspaper in London
