Performance-related pay - A 15-year experiment that hasn't worked?

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