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03 August 2006

Top executives' pay is rising twice as fast as their workers' earnings
Chief executives of FTSE 100 companies received an average 10.8% pay rise last year - twice the rate of increase in average earnings for the whole economy.

The survey by Labour Research magazine looked at the pay and benefits of chief executives from the 100 largest quoted companies. It found that top executive pay has continued to soar out of all proportion to the rest of the UK workforce, whose earnings rose by 5% in 2005.

Labour Research found Stanley Fink of hedge fund manager Man Group to be the highest overall earner on ?9.77 million. In addition to a basic salary of ?426,000 in the year ending March 2006, Fink received an annual bonus of ?5.5 million and ?71,000 in benefits along with shares under the group's performance plans worth ?3.77 million.

The average combined pay and benefits of the FTSE 100 chief executives was recorded at ?1.62 million in 2005, compared with ?1.51 million the year before.

Performance-related pay makes up a large part of the chief executives' remuneration, but even their average basic pay rise of 6.9% (up from ?627,000 a year earlier to ?633,000) outstrips the rest of the UK workforce. Lord Browne, who heads up oil giant BP, had the highest basic pay of ?1.45 million.

These findings show that executive pay has clearly continued to escalate, despite the introduction of the Combined Code on Corporate Governance 2003 which exists to govern pay in top companies. It stipulates that "levels of remuneration should be sufficient to attract, retain and motivate directors of quality required to run the company successfully, but a company should avoid paying more than is necessary for the purpose".

Neal Moister, researcher for the Labour Research Department, who carried out the survey, said the Code was clearly having little impact in some organisations. He said: "The pay of some of these chief executives seems to be spiralling out of control. There seems to be no limit on how much these executives can earn."

Editor's notes

1. The full article appears in the August edition of Labour Research magazine.

2. Labour Research is published by the Labour Research Department, an independent trade union and labour movement organisation founded over 90 years ago. More than 1,800 trade union organisations, including 55 national unions representing 99% of total TUC membership, are affiliated.

3. The survey results are based on basic pay; annual cash bonus; benefits in kind, such as cost of company car and cost of chauffeur, life and medical assurance and in some cases housing allowance; the market value of long-term investment shares received during the year; pension supplements where payable; and compensation for loss of share incentives in previous jobs. Profits from share options and pension contributions are not included.

4. The Combined Code on Corporate Governance 2003 exists to govern pay in top companies. Enforced by the Financial Services Authority watchdog, it is included in the Listing Rules for Stock Exchange companies.

5. For further information on the survey, contact Neal Moister at nmoister@lrd.org.uk or 020 7902 9224.

6. For further information on Labour Research magazine, contact editor Nathalie Towner at ntowner@lrd.org.uk or 020 7902 9817.

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