FT.com - article

The pay gap between the boardrooms of Britain’s top companies and the shop floor has nearly doubled over the past decade, research has revealed, amid widening efforts to crack down on spiralling executive remuneration. The chief executives of the UK’s 100 largest companies will earn 81 times the average pay of all full-time workers in 2009, according to figures compiled by Incomes Data Services, the pay monitoring group. In 2000, top bosses took home 47 times the average wage. The data are likely to fuel calls for reforms that would force companies to rein in executive compensation. They come just days after Sir David Walker, the City grandee, released a long-awaited report urging tough new corporate governance rules in the banking sector, including greater pay disclosure. Under the Walker recommendations, which the government has vowed to implement, banks would be required to disclose, but not name, the number of employees making more than £1m a year in total compensation, as well as to provide detail on the size of their cash bonuses and related share awards. Compared with the furore over bonuses, senior executives outside the financial services industry have largely escaped the public and political reprobation that has triggered far-reaching regulatory reforms in the banking sector. That may change, however, should evidence continue to mount that the recession is hitting rank-and-file workers harder than senior management. An analysis of the IDS data reveals that the gap between the boardroom and the factory floor reached its zenith in 2008, when FTSE100 chief executives earned 94 times the average employees’ wage. In the aftermath of the global financial crisis that multiple has come down, and now sits at around the same level as it did in 2006. However, directors of the UK’s top 350 companies have still received inflation-busting pay rises averaging 6.6 per cent over the past 12 months – twice as much as the 3 per cent median rise for workers across the economy in the year to June, the research shows. The total bonus pool for City workers is expected to be at, or near, 2007 levels, in spite of the broader economic pain of the past 18 months. Leading economists said this so-called “winner takes all” approach to pay is the product of profound societal changes, rather than any isolated financial boom. Those include the spectacular earnings of rock and pop musicians, of art world stars such as Damien Hirst and Tracey Emin, of footballers and other sports stars – much of whose income comes from sponsorship deals with companies whose chiefs enjoy moving, however tangentially, in such circles. Measures aimed at achieving good governance might, ironically, have helped fuel increases in management pay, said Alastair Hatchett of IDS. “Companies have remuneration committees,” Mr Hatchett says. “But every company wants to be in the top quartile, so they believe they need to pay top quartile wages. That just creates an upward ratchet.” The phenomenon is most notable in the US and the UK. A detailed study by Tony Atkinson, an economist, and others showed that, while senior executives’ incomes soared in these two countries in the last quarter of the 20th century, the share of income taken at the top remained relatively stable in France and other continental European countries. Amid the uproar over bankers’ bonuses, however, groups that have long pushed for corporate pay restraint are increasingly confident of change.