Directors' pay rises moderate, says IoD

Company directors are already showing the kind of pay restraint called for by Gordon Brown, the Chancellor of the Exchequer, in his pre- Budget statement last month, according to a report out today. But, as Roger Trapp reports, the findings contradict a similar survey published just two weeks ago.

Directors are enjoying rises broadly in line with inflation and the increases for employees as a whole, according to figures published by the Institute of Directors.

The findings of the survey, produced in association with the Reward Group, a consultancy specialising in pay and related benefits, are in marked contrast to those from Monks Partnership, another firm of remuneration advisers.

That showed directors' base salaries rose by 6.3 per cent - or twice the rate of inflation - over the year. Total earnings, including the last annual bonus, but excluding proceeds from long-term incentive plans, share options, pension costs and other benefits in kind, were up by 8.6 per cent.

Tim Melville-Ross, the IoD's director general, explained the difference by saying pay levels in the majority of businesses were "very different from those seen in some of the previous media coverage, which tended to focus on the very large, quoted companies."

The IoD study indicated that, while the average director's pay rose by 3.5 to 4 per cent, 51 per cent of those surveyed received 3 per cent or less, with 11 per cent receiving no increase at all. Sixty-one per cent of those covered received increases of 4 per cent or less.

He added: "The idea that UK directors are fat cats has always been a myth. There have been some cases of large company, including utility company, directors enjoying excessive rewards. However, the vast majority are in small and medium-sized enterprises working long hours on modest salaries. This latest survey reinforces the moderate way their salaries have been increased in line with inflation and the rest of the workforce."

A managing director of a company with turnover of up to pounds 25m typically had a salary of pounds 52,000 and bonus of pounds 12,000, while those in businesses with turnover of between pounds 25m and pounds 200m could expect a salary of pounds 85,000 and a pounds 20,000 bonus.

In companies with turnover of more than pounds 200m, managing directors' basic salaries rose to an average of pounds 135,000, while bonuses reached pounds 35,000.