Salaries Revisited

Posted by Justin on 2 November, 2011

Elementary / Pre-intermediate

Salaries Revisited

FTSE directors’ earnings rise by nearly 50%

Once again, directors’ pay is back in the news. A new report from a research company, the IDS (Incomes Data Services), has revealed that last year the earnings of UK directors of the top 100 FTSE companies rose by nearly 50%. The average increase in CEO salaries was 43%. What’s more, directors’ bonuses have reportedly risen by 23%, making the average bonus a staggering £900,000!

This research has generated a flurry of activity in the blogosphere. On the whole, most contributors are furious. The huge salary rises are described as ‘outrageous’ and ‘obscene’. ‘Boardroom greed’ and ‘fat cats’ are terms which occur in several posts. Many feel that directors’ bonuses are simply not linked to successful performance in the marketplace. It is not surprising that this research has triggered a wave of anger. For most ordinary workers in the United Kingdom, there is no real salary rise this year. The average pay increase is around 3.2% (2.6% in the private sector), with inflation at around 5.2%.

However, not all the posts condemn the increase in directors’ salaries. Some writers point out that, in the private sector, directors set their own salaries. That’s capitalism. What is more, CEO salaries should be high – these people take the business risks and this is rightly reflected in their pay.

The original e-lesson, ‘Salaries’, mentioned the ‘pay divide’. This latest research suggests that this gap is widening. The lesson also posed the question: ‘Are bonuses fair?’. Today, such bonuses are just a standard part of many remuneration packages. What seems to be clear is that the salaries for those at the very top are now even further removed from the everyday economic realities of the rest of us.

Some questions you may wish to discuss with your students are:

  • Are top company directors over-paid?
  • Is there a large salary gap between the lowest and highest earners in your country?
  • Are salaries keeping ahead of inflation in your own company?

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