Page last updated at 04:10 GMT, Monday, 8 September 2008 05:10 UK

Rises in directors' pay 'slowing'

Offices of leading banks in the Docklands
Union leaders have attacked the bonus culture at top banks

Directors of the UK's largest companies enjoyed pay rises well above inflation last year but salary growth has slowed, according to research from Deloitte.

The average pay increase for bosses of the largest 350 companies on the FTSE share index was 6.2%, down from 7%.

Deloitte found a growing divergence between pay at the UK's 30 largest firms, where bosses commonly earn well in excess of 1m, and other businesses.

But it said the credit crunch was now having an "impact" on executive pay.

'Bonus culture'

"Over the past year we have seen salaries continue to increase ahead of inflation," said Carol Arrowsmith, head of Deloitte's remuneration team.

"But it is possible that we have now reached the high water mark and that the world of executive remuneration may begin to change."

Union leaders and some politicians have attacked the "bonus culture" in top British companies, particularly leading City banks.

They argue that bosses paid huge sums are out of step with many staff whose take-home pay is now falling in real terms while pay hikes at banks are unacceptable at a time when many have made large losses.

The issue of directors pay is expected to feature prominently at the TUC's annual congress, which begins on Monday.

There may be tension as the gap widens between the expectations of shareholders and executives
Deloitte

Chancellor Alistair Darling has called for pay restraint "from the boardroom to the shop floor" to keep inflation under control.

Nevertheless, Deloitte found that one in four bosses of FTSE 100 firms saw their annual bonus rise last year, the average payout being about 70-80% of their yearly salary.

Given the worsening economic climate, which is likely to hit company profits and result in more lay-offs, Deloitte said employers may have to rethink pay strategies while bosses may have to alter their expectations.

"There may be tension as the gap widens between the expectations of shareholders and executives," Deloitte said.

"Shareholders will be looking very carefully at the levels of payout in the coming year and will expect to see a very strong link between payout and performance."




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