Performance-related pay A 15-year experiment that hasn’t worked?
Pay for performance? • Directors’ earnings have risen much faster than corporate performance metrics • FTSE 350 directors’ median total remuneration increased by 232.6% from 2000 -2013 • Pre-tax profit growth was the highest among the corporate metrics at 95.4%
Percentage change in median remuneration of FTSE 350 directors and selected corporate indicators 2000 to 2013 350.0%
313.9% 300.0%
268.3% 250.0%
232.6%
200.0%
151.4% 150.0%
100.0%
63.6% 50.0%
0.0%
-50.0%
IDS
95.4% 87.1%
81.0%
79.7%
-29.5%
53.6%
39.5%
Remuneration recovers more quickly than corporate performance • There are fluctuations in directors’ remuneration • In the 2008 recession directors’ remuneration fell 7.5%, but FTSE 350 companies’ pre-tax income was down 32% • Executive remuneration started to recover the following year while companies’ income was still falling.
Indexed FTSE 350 median boardroom pay trends and median corporate metrics 2000 to 2013 350 Basic salary
Total cash Total earnings Market value
300
EPS 250
Pre-tax profit
Index 2000 = 100
Revenue 200
150
100
50
0 2000
IDS
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
FTSE 350 lead executive and full-time employee earnings growth 2000-2013