Right of Reply: Ruth Lea, The head of policy at the Institute of Directors answers Ken Livingstone's attack on `fat cats'

Ruth Lea
Wednesday 16 September 1998 23:02 BST
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I READ Ken Livingstone's recent comments on directors' pay and the need for the Institute of Directors to "get their heads out of the pig trough long enough to take a look at the real world" with weary resignation.

May I explain our position? Directors' remuneration is broadly determined by market forces, as is the pay of trade union leaders, footballers, pop stars, TV presenters and son on. Moreover, for top-performing British directors, the market is international. We live in a global, market economy. This is the real world!

Now, we accept that the remuneration of large company (FTSE100) directors has increased more rapidly than for their employees in recent years. And, indeed, it has increased at a faster rate than for the vast majority of directors.

Last year we conducted an IoD members survey which showed that in 1997 the average increase in remuneration (comprising salary, bonuses and all "perks") was in the range of three to four per cent - much in line with the national average. The survey showed that the directors of many small and medium-sized companies were relatively modestly paid. Average remuneration for a director of a company with turnover of less than pounds 25m was pounds 64,000 (less than John Monks', I understand), and the equivalent figure for a director of a company with turnover of between pounds 25m and pounds 200m was pounds 105,000.

Given directors' huge responsibilities, the risks they take and the hours they commit to their firms, these figures are modest. And let us not forget the huge contribution businessmen and women make to our country. Business provides jobs and creates wealth and pays for welfare and the NHS. And pays the salary of the MP for Brent East!

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